General Election 2015: Six things you should know about the Conservatives' inheritance tax cut

 
Sarah Spickernell
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It's not the first time the Conservatives have tried to make the change (Source: Getty)

If the Conservatives win next month's General Election, party leader David Cameron says he will cut inheritance tax on homes up to £1m in value.

The proposal is being announced today, ahead of the launch of the party's manifesto next week.
"We will take the family home out of inheritance tax,” Cameron is expected to say. "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."

How it will work

The threshold for tax paid will effectively be raised to £1m, meaning any house below that net value will pass on to descendants without tax being deducted.
This will make a huge difference to those whose properties are between £325,000 and £1m in value, since a rate of 40 per cent currently applies to homes within this range.
Not all home owners will benefit from the new threshold – allowance will be gradually tapered away for properties worth more than £2m.

Where the money will come from

The cost of the new policy to the government is estimated to be around £1bn. To make up for this loss, the Conservatives say they will raise money through reducing tax relief on the pension contributions of people who earn more than £150,000 a year.

When it will apply

If the conservatives are elected, the new rule will be introduced in April 2017. It is thought that by 2020, around 22,000 families will have benefited.

It's not the first time

The Conservatives have already tried to implement a tax cut for homes under £1m once before – it was put forward as a pre-election proposal in the 2010 campaign, but was halted by the Liberal Democrats when a coalition was formed.

Family home allowance

On top of the new threshold, Cameron is promising to offer parents a "family home allowance" of £175,000. This will allow them to pass on a property to their children free of tax.

What Labour says

Unsurprisingly, Labour has reacted to the news with criticism. Chris Leslie, the party's Treasury spokesman, described the proposal as a “panic move” by the Conservatives, adding that a similar promise has been broken once before.
This is just the latest panicky promise from the Tories, but we've heard it all before. The Tories made a promise on inheritance tax before the last election and they broke it.

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