Conservatives Promise To Cut Inheritance Tax

The Conservatives have said they will take family homes out of inheritance tax by introducing a new allowance which effectively increases the threshold for tax to £1m.

David Cameron said that if his party wins the 7 May election, parents will be offered a new £175,000 allowance to enable them to pass property on to children tax-free after they die.

For properties worth more than £2m, the allowance will be gradually tapered away so that those worth more than £2.35m do not benefit.

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Inheritance tax is currently payable at a rate of 40% on the value of an estate above the £325,000 threshold - or £650,000 if a couple takes advantage of the existing allowance.

It is thought around 22,000 families will benefit from the move by 2020 and Mr Cameron said the costs would be paid for by a £1bn raid on pension tax relief for people earning more than £150,000.

Mr Cameron said: "We will take the family home out of inheritance tax.

"That home that you have worked and saved for belongs to you and your family.

"You should be able to pass it on to your children. And with the Conservatives, the taxman will not get his hands on it."

The Conservatives promised a £1m inheritance tax threshold in the 2010 election, but were blocked by Liberal Democrats from implementing it when in coalition.

Shadow home secretary Yvette Cooper told Sky's Murnaghan programme it is the "wrong priority" and "won't affect 90% of estates".

She said: "They are talking about a £140,000 tax cut for properties that are worth around £2m at a time when you've got families still losing their homes because of the bedroom tax, at a time when pensioners and families have had to pay more VAT."

The Institute For Fiscal Studies said the change would "disproportionately" benefit those on higher incomes.

In an observation published on its website after the announcement, the IFS said: "Since the children of those with very large estates are disproportionately towards the top of the income distribution the gains from this (and in fact any) IHT cut will also go disproportionately to those towards the top of the income distribution."

Meanwhile, Labour has revealed its plans to crackdown on tax-dodgers if it wins the election, hoping to cut avoidance and evasion by at least £7.5bn a year by the middle of the next Parliament.

Shadow chancellor Ed Balls said it would take a Labour government to "call time" on the Tories' "lax approach", adding that Labour would set targets for HMRC to reduce tax avoidance by at least £7.5bn a year.

He said: "We will close the loopholes the Tories won't act on, increase transparency, toughen up penalties and abolish the non-dom rules.

"And our first Budget will make sure that, following an immediate review of HMRC, it has all the powers and resources it needs to come down hard on tax avoidance and evasion."

Conservative Treasury minister David Gauke said: "Ed Miliband and Ed Balls turned a blind eye to aggressive tax avoiding and evading for 13 years when they were in charge - they were the tax avoiders' friends."

The Lib Dems have also set out their tax plans, promising "light at the end of the tunnel" with moves to eliminate Britain's deficit by 2017/18.

Nick Clegg said his plan has "a heart as well as a brain", trying to drive home his claim that his party will cut less than the Conservatives and borrow less than Labour.

Spelling out plans for a consolidation totaling £27bn by 2017/18, made up of £12bn in additional tax, £12bn in public spending reductions and £3bn in welfare cuts, Mr Clegg challenged the other parties to spell out in similar detail how they would balance the nation's books.

He said: "We are going to spread the burden of finishing the job of fixing the economy fairly across society.

"Yes that means more cuts, but it also means asking the wealthiest to pay their fare share too."

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