Midday Markets: Badenoch’s inheritance tax gamble

In a recent Midday Market report from City AM, Ali Lyon examines Kemi Badenoch's inheritance tax overhaul proposal unveiled at the Conservative Party conference. The report highlights that Badenoch, who was in a vulnerable position during her maiden speech a year ago, made a bold promise to abolish stamp duty on homes. This tax, which ranges from 2% to 12% on house purchases, is widely criticized for its negative impact on the property market and its disincentive for workers to relocate for better opportunities.

The Conservatives' decision to remove stamp duty on homes aimed to unite economists and political commentators in support of property market reform. Now, the focus shifts to Badenoch's promise to eliminate inheritance tax on family homes. This proposal is intended to be a politically savvy move, as inheritance tax is one of the most hated levies among UK voters.

However, experts warn that the move may have unintended consequences for the housing market. Critics argue that it could encourage property owners to hold onto their homes or even upsize to minimize inheritance tax, thus exacerbating the already constrained supply and potentially driving up prices. The report concludes that while the inheritance tax proposal may be well-received politically, it could inadvertently worsen an already dysfunctional tax system.