Tories: We’ll let you give £1m to your children tax-free
HOMEOWNERS will get a £1 billion-a-year inheritance tax windfall if the Conservatives win the General Election.
The pledge by George Osborne means that the vast majority of homeowners can leave all their money to their children – with not a penny going to the taxman.
But to stop Labour leader Ed Miliband portraying it as a ‘handout to the rich’, people with homes worth more than £2million will be banned from cashing in.
The £1billion annual giveaway will be paid for by slashing tax relief on pension contributions by those earning more than £150,000 a year.
The announcement will be the centrepiece of the Conservative manifesto to be launched on Tuesday.
A new ‘family home allowance’ worth £175,000 each for husbands and wives will be added to the existing combined £650,000 in 2017, making £1million in total.
The Tories hope it will spark their Election campaign – which has been criticised as ‘lacklustre’ by some MPs – into life. Mr Osborne and David Cameron hope the allowance will create ‘clear blue water’ between them and Labour and restore the Tories’ ‘homeowner’s friend’ reputation that sustained Margaret Thatcher in power for more than a decade.
By limiting the full benefit to homes worth a maximum of £2million, they hope to silence Labour taunts that the Tories are the ‘party of multi-millionaires’.
Above the £2million mark, the new death duty limit will be clawed back by HM Revenue and Customs at a rate of 50p for every pound.
Those who leave estates worth more than £2.3million will receive no additional tax benefit. Their allowance will remain at the existing £650,000 for a married couple.
Similarly, the annual tax allowance on pensions for those earning more than £150,000 – the top income tax rate – will be reduced on a sliding scale from the existing £40,000 to £10,000 for those with a salary of £210,000 or more. Using the rich to pay for the inheritance tax giveaway while denying them the benefit led to claims last night that the Conservatives are introducing their own pensions wealth tax and a reverse mansion tax.
Labour has threatened to impose a mansion tax on people with homes worth more than £2million.
Mr Osborne told The Mail on Sunday: ‘By taking the family home out of inheritance tax, our message is clear: if you work hard, save and want to pass on your family home to your children, you shouldn’t be penalised – you should be supported.’
Rising property prices mean that without action to change the threshold, the number of families paying the duty will double to one in ten over the next five years.
A similar proposal to slash inheritance tax by Mr Osborne in 2007 led to Gordon Brown’s notorious ‘on-off Election fiasco’ – from which his reputation as Prime Minister never recovered. Mr Brown planned to call a snap poll – but changed his mind when Mr Osborne’s plan sent Tory ratings soaring.
The Chancellor will be hoping his latest proposal has a similar effect on the Tories’ election prospects.