Tories to slash inheritance tax

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Published: Sunday 12th April 2015 by The News Editor

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David Cameron has launched his boldest offensive yet in the General Election battle, with a promise to end inheritance tax on properties worth up to £1 million.

The proposal revives a Tory promise from 2010 which Mr Cameron was blocked by Liberal Democrats from implementing in coalition – with the crucial difference that the benefits of a new “family home allowance” will be withheld from the most valuable estates, ensuring the wealthiest in society do not gain.

It was dismissed by Labour as a panic move which would deliver a £140,000 tax cut to owners of £2 million homes at a time when working people were paying more. Liberal Democrats said it was a mark of “desperation” from a party that knew it could not win the May 7 election.

The announcement came as Labour unveiled a 10-point plan to clamp down on tax dodgers with the aim of reducing avoidance and evasion by £7.5 billion a year by 2017.

Meanwhile Nick Clegg was setting out full details of Liberal Democrat deficit reduction proposals, which he said showed his party had a plan to balance the books with “a heart as well as a brain”.

Tories estimate that 22,000 families could benefit by 2020 from the proposed £175,000 allowance offered to parents to enable them to pass property on to children tax-free after their death.

The £1 billion scheme – to come into effect in April 2017 and available to married couples or civil partners – would be funded by a raid on pension tax reliefs for people earning over £150,000.

The family home allowance will be transferable on the death of one spouse and added to the existing £325,000 transferable allowance to bring the tax-free total up to £1 million.

But on properties worth more than £2 million, the allowance would be gradually tapered away until it was worth nothing to those with homes worth more than £2.35 million.

In a speech in the West Country, Mr Cameron will say he wants to reverse a trend which has seen soaring house prices drag ever more middle-class families into the range of the levy, which 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 have taken advantage of the existing transferable allowance.

Mr Cameron is expected to say: “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 on to your children. And with the Conservatives, the taxman will not get his hands on it.”

Labour Treasury spokesman Chris Leslie said: “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.

“At a time when our NHS is in crisis and most working people are paying more under the Tories, it cannot be a priority to spend £1 billion on a policy which the Treasury says would not apply to 90% of estates. The Tories would choose to give a £140,000 tax cut for a house worth £2 million while they have increased VAT on families and pensioners.”

Liberal Democrat Chief Secretary to the Treasury Danny Alexander said: “Once again, the Tories have the wrong priorities. For the last five years Lib Dems have championed tax cuts for working people while Conservatives have wanted to cut tax for the best-off.

“It is extraordinary that the Tories will go into great detail on a policy that will cut tax for a small number of estates, but steadfastly refuse to give any detail at all on the massive cuts to public services that they desire.”

Around 300,000 people earning more than £150,000 are expected to be affected by the proposed reduction in tax relief on pension contributions to pay for the inheritance tax policy. The size of the annual relief would be gradually tapered down from £40,000 for those earning £150,000 to £10,000 for salaries of £210,000. Contributions above the allowance level attract tax at 45% for those in the top income tax bracket.

In an interview with the Sunday Times, Mr Cameron also revealed that the Tory manifesto will include a pledge to ban EU migrants from claiming in-work benefits until they have been working in the UK for four years. At present, new arrivals can immediately claim up to £10,000 a year in benefits – £8,000 of it from tax credits.

Mr Cameron told the paper: “People say, ‘Will these welfare changes change the immigration figure?’ Oh yes they will, because currently the draw from in-work welfare benefits is very, very great.

“It’s an issue of fairness that you shouldn’t be able to take out of our system until you have paid into our system.”

Published: Sunday 12th April 2015 by The News Editor

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