Inheritance Tax

Caroline Johnson Excerpts

Wednesday 14th October 2026 Commons Chamber

[Dr Caroline Johnson (Sleaford and North Hykeham) (Con)]

It is clear that the hon. Member is taking this issue very seriously and thinking about it very deeply. What does he think about inheritance tax on businesses? I give him the example of a bandage factory making sterile bandages, owned by a family, where the 40-odd-year-old gentleman currently running that factory stands to lose quite a lot of money when his father dies. That will mean laying off people or selling the factory. How does that help the people who work there?

[Andrew Lewin]

I obviously do not know the circumstances of that particular business, but I do know that, as the Minister set out, there is a threshold of £2.5 million under which no business will pay any inheritance tax at all. I think that is a fair place to start, and that is the status quo.

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[Dr Caroline Johnson]

Will the hon. Lady give way?

[Catherine West]

I will not, because I have only 40 seconds and I know that other Members want to speak.

We will get on with delivering the difficult decisions and the change that our communities are longing to see.

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[Tim Roca]

The Conservatives point to stamp duty as a barrier and promise to scrap it on a home, but removing one cost does not automatically resolve every other tax consequence, and we know that changes in tax policy are very behaviour sensitive. This is what happens when a party writes a policy to win a headline for a conference.

It brings me back to Churchill. More than a century ago, he challenged the idea that inherited wealth should be waved through simply because it happened to belong to the right family. He asked the straightforward question that I quoted at the beginning: did you earn your wealth, or was it left to you?

As my hon. Friends have said, people want to leave something to their children. There is nothing wrong with that. But why should the Government spend billions helping those who are already wealthy pass on even more while telling everyone else that public spending should be cut?

[Dr Johnson]

The hon. Gentleman is making a distinction between money earned by somebody and money earned by their father. If a man and his daughter run a business together and the father dies, should the daughter not inherit? How much did she earn the money by working in that business? Did she not earn it? Why should it matter? That business employs people—whom the hon. Gentleman has talked about—who will lose their job if that business must close.

[Tim Roca]

If the hon. Lady wants to have an argument with Churchill, she may do so, but I will not join her. I believe he was a great man.

Why should the Government spend billions helping those who are already wealthy? Why should families inheriting millions take priority over families struggling with bills? That is the choice at the heart of this motion: invest in services and support people who rely on them or hand a huge tax break to a small minority and leave everyone else to bear the cost.

The Conservatives’ record makes their claims of fiscal responsibility even harder to take seriously. Between 2010 and 2019 the national debt increased from £1 trillion to £1.8 trillion. That was before covid and the war in Ukraine. Debt to GDP increased from 69% to 84%. As Members have pointed out, we then got treated to the Liz Truss magic of a disastrous experiment in unfunded tax cuts that sent markets into turmoil and damaged confidence in the UK.

Then before the 2024 election we had many other promises of tax cuts worth billions that did not have any credible funding plans set behind them. Here they are again with another enormous tax giveaway but unable to tell us precisely which public services would pay the price. They have not learned the lessons of their failure; they just found new ways to replicate them.

The public finances are not a bottomless pit that politicians can dip into whenever they fancy announcing a tax cut. Every promise has to be funded properly, because it has consequences for real people. The Conservatives spent years telling people that there was no alternative to difficult decisions, yet when it comes to their own priorities, they make the promise and leave somebody else to deal with the bill. That is not fiscal responsibility; it is fiscal incontinence.

Their priorities are clear when we look at the two-child limit. The Conservatives indicated that they would reinstate a policy that would push 500,000 children back into poverty. At the same time, they want to direct a substantial tax benefit towards a tiny number of wealthy estates. The contrast is clear: they tell families on low incomes that the country cannot afford to help them, but they propose billions in tax cuts for the very wealthy. That is a choice, and it tells us who they put first in our society.

[Dr Johnson]

What proportion of people working in the private sector on low wages are employed by people who own businesses?

[Tim Roca]

As they say in “Father Ted”, that is an ecumenical matter. I am sure that the Minister will pick it up in his wind-up.

Labour Members have done a great job of outlining the fantastic measures that the Government are taking, including measures on VAT and electricity bills, capping bus fares and 24-hour bus travel for disabled people from next April, so I will not touch on those. I will finish on what has—I hope—been the main theme of my speech. Today is all about one thing: tax cuts for the wealthiest, cuts to public services for everyone else. It is the same old Conservatives. They have not changed at all.

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[Noah Law]

I respect the point the hon. Member makes and fully respect what she says about the aspirations of those of us who grew up in rural areas where property prices are often inflated. But I will be honest: I know very few people from back home who have ever paid inheritance tax. I do not know these people. If she would like to correct me on that—

[Dr Johnson]

On the point of ideology, what I have tried to get from my interventions is an understanding on the Government Benches that inheritance tax penalises people at all levels. If people do not start a business because it is not worth the bother, if they do not invest because it will be taken off them, and if they cannot pass a business on to their children and, as a result, it has to be sold and the jobs are lost, people do not have jobs and employment, and everyone is affected.

[Noah Law]

It is objectively untrue that inheritance tax penalises people at all levels. It penalises, at best, 4% or 5% of people with the wealthiest estates. I understand the cultural arguments that the Conservatives are making about aspiration and all the rest of it—we should all strive to support that—but, as my hon. Friend the Member for Harlow (Chris Vince) pointed out, this proposal is not pragmatic at all; this is bonkers.

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[Gregory Stafford]

My right hon. Friend is absolutely right. In my constituency—and, I am sure, in his constituency and across the country—small family businesses are having to make really tough decisions about what they are going to do. He is right that they will often go to foreign firms, because those firms will not be hit by this level of taxes. Hitting British businesses so that they will be sold to foreign ones is an odd focus for this Labour Government. It is extraordinary, and if the Government do not see that, they really must think again.

Think of an owner in their 60s deciding whether to buy a new machine or take on another apprentice. Now they must first ask, “What will this do to my tax bill that my children will inherit?”—a tax that, as my right hon. Friend the Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson) said, makes owners think twice before investing and building growth.

[Dr Johnson]

My husband is a farmer and runs businesses. He feels a huge responsibility not just in building his business, but to the people he employs. Those people will be affected if the business does not grow or does not invest because he is worried about this tax.

[Gregory Stafford]

My hon. Friend is absolutely right, and she neatly brings me on to some comments about family farms. She is right: it is not just the people who are running these businesses or those people who might inherit them who will end up losing out, but the employees of those businesses too. That is why we are not getting the growth that Labour claims it wants.

With family farms such as Luff’s in Headley, the land, tractors, buildings and a lifetime of labour are passed from generation to generation. The National Farmers Union has calculated that a typical cereals farm making roughly £34,000 a year would face 10 annual instalments of £53,000 a year at the original £1 million threshold. Even at the new threshold, payments of £33,000 a year would swallow nearly all the profit. Essentially, in order to pay, a farmer will have to sell the very fields that earn the living.

The Royal Agricultural Benevolent Institution found that more than a third of farmers are probably or possibly depressed. The Farming Community Network, which supports more than 10,000 people, says that its helpline has been taking calls linked to the upcoming Budget for weeks. As my hon. Friend the Member for Keighley and Ilkley (Robbie Moore) said, this tax has led to suicides. That is a disgrace, and the Government should recognise that and do everything they can to repair the damage that they have done emotionally and economically to our farms. It was only when Ministers were challenged by the shadow Environment Secretary, my right hon. Friend the Member for Louth and Horncastle (Victoria Atkins), that they raised that threshold. If it was right to raise the threshold then, because it was the wrong threshold, can the Government not look at it again and remove it?

Moving on briefly to the general inheritance tax points, the nil rate band has been at £325,000 since 2009. Labour has now said that it will freeze it until April 2031. Had that band risen with inflation, it would be at more than half a million pounds today. To dispel the myth that has been put forward by the Government that inheritance tax affects only a small number of people, the OBR expects one in 10 estates to pay by the end of the decade. The Institute for Fiscal Studies puts that figure at one in six. It will not hit just a small number of people.

A married couple can pass on up to £1 million if their home goes to their children. That might sound generous, but once we add a family home in my constituency to a lifetime of savings and, from April 2027, their pension pots, it is not a significant amount of money in the grand scheme of things. That is especially important when that pension relief is what we on all sides of this House were telling people to do. We were telling people to save for their future, and the reward for their saving is the Government taking more of it in tax. Households that never thought of themselves as wealthy are being pulled in. Under Labour, aspirational families are hit on the way in and unfortunately they are hit on the way out. As Members have said, the shopkeeper will sell their business to fund retirement and the farmer will sell the fields to try to keep just a small measure of their farm.

The Minister on the Treasury Bench must take this message back to the Chancellor: rule out these changes and make things better for our local areas. As the Conservative Opposition, we present an alternative. We will abolish tax on the family home, and we will do that by slashing the welfare bill by £7 billion. It is the first step, and the shadow Chancellor and the Leader of the Opposition have outlined their ambition to go further.

It comes down to a fundamental point. On the one side, we have a Government who see a lifetime of savings and a business built over generations as just another tax opportunity. On the other, we have an Opposition who believe that those savings belong to the family who earned them—not the grifters, not the idle rich, but the grafters. They built this country, and unlike Labour, a Conservative Government will let them keep those savings.