The Inheritance Not Everyone Shares

Why I support inheritance tax, and why it is currently failing the people it was built for

There is a sentence that gets said at dinner tables across Britain, usually with a shrug: "We were lucky. Mum and Dad helped us out."

I have no quarrel with that sentence. If a parent works their whole life and wants to hand their child a deposit, that is love expressed in money, and I would not legislate it away. But I want to look honestly at what happens when that private act becomes the primary mechanism by which an entire country distributes the right to own a home. Because that is what has happened. And once a private kindness becomes a public sorting system, it stops being generosity and starts being an inheritance of position.

1. The Bank of Mum and Dad is now a national institution

More than half of all first-time buyers, 53%, now receive direct financial support from family through gifts, loans or inheritance. That came to £8.3 billion in gifts and loans in 2025, or £11 billion once inheritance is counted. The average buyer's own savings of £24,261 cover just 44% of a typical deposit.

The rest comes from somewhere else. For half the country that somewhere is a family. For the other half, it is years.

Hold that £8.3 billion in your head. It is about to do a lot of work.

2. Who actually pays inheritance tax, and who quietly doesn't

The noise around this tax is wildly out of proportion to its reach. Only 4.62% of UK deaths resulted in an inheritance tax charge in 2022/23, around 31,500 estates, and even once pensions enter its scope in 2027/28, just 8% of estates are expected to pay. It raises roughly £8.7 billion, some 0.7% of all government receipts. Put plainly: 95% of estates pay nothing.

Now the uncomfortable half. The headline rate is 40%, but almost nobody at the top pays anything like it. The effective rate peaks at 25% on estates worth £3 to £7.5 million, then falls to 17% above £10 million. Among estates worth £30 million or more, Business Relief alone nearly halves the effective rate, from 23% to 12%, and only a quarter of those claiming it on shares had been a company director at any point in their final five years. Most claimants are passive investors, not the working business owners the relief was written for.

Estimate, flagged as such: no official figure exists for how much liable wealth escapes through planning. But given the gap between a 40% headline and observed effective rates of 12% to 25% at the top, it is defensible to say the largest estates shelter roughly half to two-thirds of what a flat application of the rules would take.

This is my whole quarrel with the system. Inheritance tax is not too harsh. It is aimed at the wrong altitude. It lands squarely on the £1.2 million semi-detached estate and glances clean off the £30 million one.

3. What inheritance is actually doing to life chances

A fifth of people born in the 1980s are expected to inherit less than £10,000. A quarter will inherit over £280,000.

The consequence, from the IFS: for that generation, inheritance raises lifetime income by 5% for those whose parents sat in the bottom fifth of the wealth distribution, and by 29% for those whose parents sat in the top fifth. For the 1960s generation, inheritance explained about a quarter of the living-standards gap between people from different parental backgrounds. For the 1980s-born, it explains a third.

A third. Not a third explained by schooling, or effort, or the job you took at 22. A third explained by whose funeral you attend.

And "most people inherit nothing" is the wrong complaint. Most inherit something; the share expecting an inheritance rose from 72% of the 1960s-born to 81% of the 1980s-born. The problem is size and timing. The median UK inheritance is around £11,000 against an average expectation of £132,000. That is not a deposit. It is a second-hand car and a headstone. And it arrives late, with the age of losing a last surviving parent rising from 58 for the 1960s-born to 64 for the 1980s-born.

Meanwhile the ladder keeps rising. The average first-time buyer in England is now 34, up from 31 in 2003/04, against houses costing 7.63 times earnings versus roughly four times in 2000.

Estimate, flagged as such: that age of 34 blends assisted and unassisted buyers. Given that over half receive family help, a reasonable estimate is that the assisted buyer arrives at around 31 and the unassisted at around 36 or 37. Five years of rent instead of equity. At £1,200 a month, that is £72,000 handed to a landlord rather than £72,000 of capital, compounding for the rest of their life.

I’m rambling on, here’s my actual proposal.

4. The proposal: a First Home Endowment

Here is the symmetry that convinced me this is not a fantasy.

The Bank of Mum and Dad transferred £8.3 billion to first-time buyers in 2025. Inheritance tax raises £8.7 billion.

The state already collects, every single year, almost exactly the sum that private families hand to their children for deposits. It simply spends it on nothing in particular.

The scheme. Hypothecate every penny of inheritance tax into a ring-fenced First Home Endowment, paid as a deposit grant to first-time buyers aged 21 to 35.

• Grant: £20,000, paid directly to the conveyancer at completion.

• Volume: at £20,000 a head, £8.5 billion funds roughly 425,000 grants a year, more than the UK's annual first-time buyer total. And receipts are forecast to reach £14.3 billion by 2029/30, which would fund the grant and the taper below with room to spare.

• Taper: the grant reduces pound-for-pound against family gifts or inheritance already received above £10,000, and disappears at £30,000 of family support. This is the point. It is not a universal handout; it is a floor. It reaches the person the current system misses.

• Age window: 21 to 35, deliberately. It intervenes at the age when a deposit changes a life, rather than at 64, when it changes a pension.

• Conditions: regional price caps, five-year clawback on sale, one claim per person for life.

The honest objection. Demand subsidies inflate prices, as Help to Buy proved. So this scheme must be legally coupled to supply: the endowment's drawdown rate is tied to housing completions, and any surplus in years when building falls short is redirected into social and affordable housebuilding. A deposit grant in a market that isn't building is a price rise with extra steps. Say so before your critics do.

5. What it costs the people currently inheriting

This is the part I most want the beneficiaries of the current system to read, because I am not proposing to take their inheritance.

Nothing above changes the thresholds. A couple can still pass on up to £650,000, or £1 million where the estate includes the family home. The roughly 90% of estates that pay no inheritance tax are not affected at all.

Consider an estate of £1.2 million passing from a married couple to their children. Tax is due on £200,000 at 40%, which is £80,000. The children receive £1.12 million instead of £1.2 million. They are 6.7% poorer. They still inherit a house outright, mortgage-free, plus change.

Against that £80,000: four other young people get a deposit. Four households stop renting. Four families begin accumulating equity in their twenties rather than their forties.

That is the trade. A 6.7% reduction in a seven-figure windfall, against four people crossing a threshold they would otherwise never reach. If we cannot make that trade, we should stop describing ourselves as a society and start describing ourselves as an estate.

And the reform that makes it fair to those heirs is the one at the top: cap Business and Agricultural Relief, close the pension route properly, and address the uncapped spouse exemption. CenTax finds that the overall regressivity of inheritance tax stems mainly from the uncapped spouse exemption, with Business Relief driving it further only above £12.5 million. The IFS estimates that capping agricultural and business relief at £500,000 per person would raise £1.4 billion this year, rising to £1.8 billion by 2029/30. The middle-class estate paying 25% has every right to be angry, not at the scheme, but at the £30 million estate paying 12%.

6. Why this is a question of welfare, not just fairness

Between £5.5 and £7 trillion will pass between UK generations over the next thirty years. That wealth is arriving whether we plan for it or not. The only question is whether it lands as a lottery or as a foundation.

The welfare case is straightforward and it is fiscal. A renter at 67 is a liability to the state in a way an owner is not: housing benefit in retirement, insecurity, mobility, the compounding cost of never having had an asset. A country where ownership is inherited rather than earned is a country quietly committing itself to housing its pensioners forever. The First Home Endowment is not charity to the young. It is the cheapest long-term social care policy available, disguised as a deposit.

And there is the moral core. We already accept the principle that an advantage given at 25 transforms a life. That is precisely why parents who can afford it give it. Fifty-three per cent of first-time buyers are living proof that it works. The argument for the endowment is not that family help is wrong. It is that family help demonstrably works, and that a thing which works this well should not be rationed by parentage.

I am for inheritance tax. I am for it because a society that taxes the dead to unlock the living is a society that believes effort should still mean something. What I am against is a version of it that raises £8.7 billion from the moderately wealthy, lets the very wealthy pay 12%, and then spends the proceeds on nothing anyone can name.

We are already running a national deposit scheme. It is called family. All I am asking is that we extend the membership.

Is an inheritance a gift or an unearned advantage?