When an Inheritance Isn't Cash

Kemi Badenoch’s inheritance-tax proposal raises a difficult question: should a family home, working farm or business be treated differently when paying the tax could mean selling the very asset being inherited?

13 October 2026

Sir,

Kemi Badenoch's proposal to remove inheritance tax from the family home identifies a genuine problem. I'm less convinced that being a home is quite the right test.

Someone who bought an ordinary house in the 1980s did not necessarily set out to accumulate a small fortune. They bought somewhere to live. Forty years of rising house prices may now put a very large number against the same bricks. That increase is real wealth, but it isn't cash sitting in a bank account.

Farms make the problem harder to ignore. A farm worth millions may also be somebody's home, workplace and family business. If meeting the tax bill means selling part of it, the inheritance can arrive with instructions to dismantle it.

Simply exempting farms isn't much better. Agricultural land has also been attractive for inheritance-tax planning. There is a difference between protecting somebody who has spent a lifetime farming and protecting wealth because somebody found a tax-efficient field to put it in.

The useful distinction is between continuity and disposal.

Someone inheriting a long-held home, working farm or family business could apply for additional relief or extended deferral where existing arrangements still leave them facing a forced sale. An accessible tribunal might handle cases that don't fit neatly into a tax rule.

That would bring complications of its own, not least preventing another relief from becoming another avoidance scheme. But one safeguard seems fairly obvious: sell the protected asset later and the deferred tax becomes payable.

Cash and readily realisable investments present a rather different problem. Nor should putting a sufficiently expensive front door on an estate provide an unlimited exemption simply because somebody lived behind it.

Inheritance tax is supposed to tax inherited wealth. The awkward cases are those in which much of that wealth is tied up in something the beneficiary intends to continue using.

If the first thing an heir has to do is sell the inheritance to afford it, the tax system may be asking the wrong question.

R. D. Kerr