PolicyLens

Methodology note

Reverse business inheritance-tax changes: calculation note

Scenario assumptions behind the Reverse business inheritance-tax changes estimate. The figures are illustrative and exclude unrelated Conservative pledges.

View main policy page: Reverse business inheritance-tax changes

Central fiscal result

+GBP 0.9bn - Net fiscal impact in 2028-29

Low case: +GBP 0.3bn. High case: +GBP 2.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • Model reversal of BPR restrictions by 2028-29.
  • Central cost assumes a broad restoration of relief.
  • Baseline is the post-2026 BPR allowance regime.
  • Agricultural property relief is modelled separately.

Affected population

  • Affected population is estates claiming business property relief.
  • Direct beneficiaries are heirs of qualifying business assets.
  • Indirect exposure includes employees, creditors and buyers of family firms.
  • Passive-investment boundaries are economically important.

Gross impact

  • Central cost: GBP 0.9bn annual lost IHT revenue.
  • Low case assumes tight eligibility and limited planning.
  • High case assumes avoidance and expanded claims.
  • No firm-survival saving is booked.

Fiscal build-up, central case

  • Lost inheritance-tax receipts: +GBP 0.9bn
  • Compliance and anti-avoidance: GBP 0.0bn
  • Higher business continuity receipts: GBP 0.0bn
  • Avoidance response: GBP 0.0bn

Central net impact: +GBP 0.9bn in 2028-29.

Behaviour and pass-through

  • Low case assumes active trading-business tests constrain claims.
  • Central case assumes broad relief restoration.
  • High case assumes wealth planning expands use of BPR.
  • Business continuity gains are real but not automatically fiscal savings.
  • Distributional effects are skewed to taxable estates.

Phasing

  • 2026-27: +GBP 0.2bn. Preparation or partial implementation.
  • 2027-28: +GBP 0.7bn. Main ramp-up year.
  • 2028-29: +GBP 0.9bn. Target-year central estimate.
  • 2029-30: +GBP 0.9bn. Continuation at steady-state assumptions.

Main source groups

  • con-plan-2026: Conservative live policy page; used to identify current pledge wording.
  • apr-bpr-2026: APR/BPR policy note; inheritance-tax relief distribution and revenue baseline.
  • autumn-budget-2024: Autumn Budget baseline for tax measures Conservatives would reverse.
  • hmrc-ready-2025: HMRC tax ready reckoners; main tax-cost anchor.
  • mirrlees-2011: Tax design principles; informs behavioural and incidence assumptions.
  • saez-slemrod-giertz-2012: Taxable-income responses; informs behavioural and incidence assumptions.