Reform UK Proposes Complete Elimination of Inheritance Tax

Britain's inheritance tax — the 40% levy on estates above £325,000 that has been described as "Britain's most hated tax" — is under siege from multiple directions. As Labour tightens the screws on agricultural and business exemptions, a new IEA report brands the UK's regime "one of the harshest in the world," and Rupert Lowe's Musk-backed Restore Britain party has made full abolition a centrepiece of its economic platform. The question is no longer whether inheritance tax will change, but who controls the terms of that change — and who benefits.

The New Right Outbidding Reform UK

When Nigel Farage told a crowd of farmers in February 2025 that Reform UK would scrap inheritance tax entirely, it was a characteristically bold pledge from a party already polling above the Conservatives [1]. But Farage's promise has since been overshadowed by a more radical challenger from within his own ranks.

Rupert Lowe, the former Reform UK MP for Great Yarmouth who defected to launch Restore Britain as a formal political party in February 2026, has embedded inheritance tax abolition within a sweeping economic libertarian manifesto that includes slashing personal income tax, setting the "lowest corporation tax in Europe," eliminating IR35 regulations for contractors, and doubling the VAT threshold [2]. Where Reform UK offered tax cuts, Restore Britain offers something closer to a bonfire of the fiscal state.

The distinction matters politically. A March 2026 poll showed Restore Britain at 10% of the vote, drawing almost exclusively from Reform UK's base and pushing Farage's party down to 25% — just five points ahead of the Greens [3]. Elon Musk's public endorsement on X — "Join Rupert Lowe in Restore Britain, because he is the only one who will actually do it!" — has given the fledgling party outsized visibility [4]. In an already fractured right-wing landscape, the abolition of inheritance tax has become a litmus test: a signal of how far a party is willing to go in dismantling the tax system.

£8.7 Billion and Climbing: What Abolition Would Actually Cost

The politics of abolition run headlong into the arithmetic. Inheritance tax receipts have surged over the past decade, driven by frozen thresholds and rising asset prices — particularly in housing.

Source: HMRC / Office for Budget Responsibility

Data as of Mar 17, 2026CSV

In the 2024/25 financial year, HMRC collected a record £8.2 billion from inheritance tax [5]. The Office for Budget Responsibility forecasts £8.7 billion for 2025/26, representing 0.7% of all tax receipts [6]. Under existing policy — including Labour's tighter rules on agricultural and business reliefs taking effect in April 2026 — annual receipts are projected to reach £14.5 billion by 2030/31, a 67% increase over five years [7].

Abolishing the tax entirely would blow a hole in public finances equivalent to nearly half the annual schools budget. Advocates argue the true cost would be lower, since inheritance tax distorts economic behavior and drives wealth offshore. But the Economics Observatory has found that 83% of the fiscal benefit of abolition would flow to the wealthiest 5% of estates, with roughly half concentrated in London and the South East [8]. Over 90% of the population would see no direct benefit, since fewer than one in twenty estates currently pay any inheritance tax at all.

The Farmer Factor: How Labour's Reforms Fueled the Backlash

Much of the current political energy around inheritance tax traces back to November 2024, when Chancellor Rachel Reeves announced that agricultural and business property relief — which had allowed farming estates to pass to the next generation effectively tax-free — would be capped at the first £1 million of combined assets from April 2026 [9].

The response was explosive. Thousands of farmers descended on Westminster, driving tractors into Parliament Square under the banner "No Farms, No Food." The National Farmers' Union claimed more than 60% of farms could be affected. A second rally in February 2025 brought over 1,000 tractors to central London [10]. The protests tapped into a deeper rural grievance: farmers are often asset-rich but cash-poor, with land values pushing them above the threshold even as daily operating margins remain razor-thin.

The government partially backed down. In December 2025, the threshold for 100% agricultural and business property relief was raised from £1 million to £2.5 million — meaning couples can shield up to £5 million of qualifying assets. Relief above the cap continues at 50%, and farm-related IHT bills can be paid interest-free over ten years [11].

But for Restore Britain and Reform UK alike, the climbdown was not enough. Both parties have seized on the farmer protests as evidence that the tax system is fundamentally broken — and that only abolition, not reform, will do.

The IEA's Case: "Arbitrary and Distortionary"

The intellectual ammunition for abolition arrived on March 16, 2026, with the publication of "A Taxing Inheritance" by the Institute of Economic Affairs [12]. Written by economist Rory Meakin, the paper makes several key claims:

International outlier. The UK has the fifth-highest inheritance tax burden in the OECD when measured by what parents can actually leave their children. Nearly half of OECD members — 18 out of 38 — levy no tax on such transfers at all, and a further 10 charge preferential rates for parent-to-child bequests [12]. Notably, this group includes Sweden and Norway, countries not typically associated with low-tax ideology. Sweden's Social Democratic Workers' Party repealed its inheritance tax in 2005 [13].

Disproportionate complexity. The Tolley's handbook for inheritance tax runs to 1,000 pages — compared with 2,500 pages for income tax, which raises 37 times the revenue. HMRC spends £66 million annually administering the tax [12].

Concentrated burden. Of 31,500 estates that paid inheritance tax in 2022/23, the vast majority — 27,920 — had net values below £2 million. The wealthiest estates, which have access to sophisticated avoidance strategies, often pay lower effective rates than mid-range estates [12].

If full abolition is too costly, Meakin proposes alternatives: raising the nil-rate band to £2 million (which would remove the overwhelming majority of estates from liability), cutting the headline rate from 40% to 20%, or reducing the gifting exemption period from seven to three years [12].

The Counter-Argument: Who Really Benefits?

Critics argue that the abolition campaign is fundamentally misleading about who gains and who loses.

Tax Justice UK's head of advocacy, Caitlin Boswell, has accused Reform and Restore Britain of "promising to rig the tax system further for a small minority." She points out that abolition would primarily benefit the wealthiest estates while depriving public services of billions in revenue [1]. A 2023 study by the Demos think tank found that three-quarters of respondents across all political backgrounds supported taxing inheritance. When asked directly whether the government should scrap the tax or use the revenue for public services, 63% chose public services — versus just 14% who favored abolition [1].

Source: Tax Foundation / OECD

Data as of Mar 17, 2026CSV

The Institute for Fiscal Studies has taken a more nuanced position, arguing that the current system is poorly designed but that reform, not abolition, is the right response. The IFS notes that inheritance tax in its current form reduces wealth inequality "by about a tenth" — a modest but real effect that would vanish entirely under abolition [14]. Structural problems — such as pension pots avoiding taxation entirely, agricultural land being used as a tax shelter, and very large estates paying lower average rates than mid-sized ones — could be addressed through targeted reform while preserving the revenue base.

The Fabian Society has argued that inheritance tax is one of the few mechanisms available to break the self-reinforcing cycle of inherited wealth and that its abolition would accelerate inequality at a time when intergenerational wealth gaps are already widening [15].

The Political Landscape: A Right-Wing Bidding War

The inheritance tax debate cannot be separated from the broader fragmentation of the British right. With Labour in government and the Conservatives in historic decline, the populist right is engaged in a bidding war for the votes of older, asset-holding homeowners — the demographic most likely to be affected by, and most hostile to, inheritance tax.

Reform UK, polling around 25-30% nationally, had already committed to full abolition under Nigel Farage and Richard Tice, with Tice arguing the tax causes entrepreneurs to "flee Britain" [1]. But the emergence of Restore Britain — backed by Musk's social media megaphone and polling at 10% — has forced the ante higher. Lowe's platform goes beyond tax abolition to encompass mass deportation, death penalty referendums, banning the burqa, and defunding the BBC [2]. Inheritance tax abolition sits within this maximalist frame as a signal of radical intent, not merely fiscal policy.

The irony is that this right-wing split may ultimately benefit Labour. With Reform and Restore Britain competing for the same voters, the anti-Labour vote is divided three ways (including the rump Conservatives at 13%), making it harder for any single opposition force to mount an effective challenge [3].

What Happens Next

Labour has shown no inclination to abolish inheritance tax — indeed, the direction of travel under Reeves is toward broadening the base, with unused pension pots set to be included in estates from April 2027 [11]. The government's concession on agricultural relief thresholds was a tactical retreat, not a strategic shift.

But the political pressure is real and growing. With IHT receipts climbing relentlessly due to frozen thresholds and rising house prices, more families are being drawn into a tax that was historically paid only by the very wealthy. The OBR's projection of £14.5 billion in annual receipts by 2030/31 implies that the number of affected estates will continue to expand — creating a steadily widening constituency for reform or abolition.

The IEA report, the farmer protests, and the Restore Britain platform are all symptoms of the same underlying tension: a tax that most people never pay but many people fear, administered through a system of baroque complexity, in a country where home ownership is both a cultural aspiration and the primary vehicle for intergenerational wealth transfer. Whether the answer is abolition, a higher threshold, a lower rate, or a fundamental redesign remains one of the most politically charged fiscal questions in British politics.