Families to keep value of homes
Tories say inheritance tax cut means only millionaires will pay
The party has countered claims that it was rewarding the rich by arguing that, on the contrary, it means only millionaires would pay inheritance tax because it would mean an effective threshold of £1m for a couple.
Mr Osborne says 22,000 families – mainly middle income families – would benefit from the move by 2020 and that the cost would be paid for by a £1 billion raid on pension tax relief for people earning more than £150,000.
The Conservatives promised a £1m inheritance tax threshold in the 2010 election, but were blocked by their Liberal Democrats partners when they formed the coalition.
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.
The latest plan would be offered via a new £175,000 allowance or properties worth more than £2m, the allowance will be gradually tapered away so that those worth more than £2.35m do not benefit.
The Prime Minister said in a speech this morning: “That wish to pass something on is about the most basic, human and natural instinct there is. And that’s why for a long, long time I have wanted to act on inheritance…
“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 onto your children. And with the Conservatives, the tax man will not get his hands on it.”
The Chancellor said the policy spoke to a “deep-rooted human instinct”.
He told the BBC’s Andrew Marr Show: “I think this is about values – Conservatives support the basic human instinct to provide for your children. We will take family homes out of inheritance tax; we will effectively increase the inheritance tax threshold to £1m so only millionaires pay inheritance tax.
“We are on the side of hard working people, we want to support the most vulnerable in our society and you do that by backing the aspirations in our society as well. The basic aspiration to provide for your children is a deep rooted human instinct that we support.”
Dubbed by the Tories as the “death tax”, a YouGov poll last month showed it was the most unpopular tax among voters of all parties.
Close to 60% of those surveyed said the tax is unfair compared with just 22% who considered it fair. The only taxes that came close to being as unpopular were fuel duty and the BBC licence fee.
It was widely reported around the time of the Budget that the Tories planned to put raising the inheritance tax threshold at the heart of their General Election tax pledges.
Labour has criticised the plan at a time when the less well-off are being hit with the bedroom tax. It plans to raise an exrta £7.5bn by closing tax loopholes and imposing bigger fines on tax avoiders.
The Lib Dems want to eliminate the deficit by 2017/18 by raisingan additional £12bn of tax, cutting public spending by £12bn and cutting welfare by £3bn.
The Green Party said it wants the top rate of income tax to rise to 60% from its current threshold of 45%. It says the move would bring in a further £2bn.
It was lowered from 50p by the Coalition Government and only affects the top 1% of earners whose salaries are above £150,000.