Tories Set To Cut Inheritance Tax In Budget

A Tory election pledge to remove homes worth up to £1m from inheritance tax is expected to be one of the big announcements in the Budget next week.

Sky News has learned that the Chancellor will promise to raise the current threshold, which is currently £325,000 per person, in a move which will delight Conservative MPs and supporters.

Signalling the Budget announcement, in a joint article in The Times, David Cameron and George Osborne say: "As we promised in our manifesto, we'll take the family home out of inheritance tax for all but the richest - and it's a promise we will keep.

"As we said we would, we'll pay for this reform by limiting the pension tax relief to those who are earning more than £150,000.

"It can only be right that when you've worked hard to own your own home, it will go to your family and not the taxman."

But the change, which could be phased in over the next four years rather than brought in immediately, is bound to be attacked by Labour - and the Tories' former coalition partners the Lib Dems - as a tax handout for the rich.

At present, inheritance tax is payable at 40% on estates above a tax-free allowance of £325,000 per person.

The Conservative manifesto said that from April 2017 parents would each be offered a further £175,000 "family home allowance" which could be added to the £325,000 inheritance tax threshold bringing the total tax-free allowance for parents in a married couple or civil partnership to £1m.

Mr Osborne first promised an inheritance tax cut when he was shadow chancellor at the 2007 Tory conference.

:: Full coverage of the Budget live on Sky News this Wednesday from 11am

That pledge was seen as having panicked Gordon Brown into ditching his snap election plans after succeeding Tony Blair as Prime Minister a few months earlier.

But when the Conservatives went into coalition with the Liberal Democrats it was stalled.

During the election campaign, the Lib Dem Treasury Chief Secretary Danny Alexander, one of dozens of Scots MPs swept away by the SNP tide, said promising to cut inheritance tax showed the Tories had the wrong priorities.

The strong pre-Budget signal on inheritance coincides with a raft of housing measures also being promised by Mr Cameron and Mr Osborne.

These plans, which will be in a Housing Bill in the autumn, include steps to build discounted homes for first time buyers on all reasonable sized developments, unlock public land for hundreds of thousands of new homes and back small builders with planning changes.

The Government is to press ahead with plans to give housing association tenants the chance to buy their own home with a discount of up to 70% when they do so.

The Help to Buy programme will be extended to 2020 and new reasonably sized housing developments will have to include starter homes - new builds exclusively for first time buyers under 40, at a 20% discount.

Other housing measures will include bringing forward land with development potential for 100,000 homes.

A £1bn brownfield fund will also be established to give councils money to get land ready for development as soon as possible.

There will also be planning reforms and help for small builders.