David Cameron has followed UKIPs lead by offering to raise the level at which families pay inheritance tax to £1m. 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.
Speaking on the Andrew Marr show this morning, Chancellor George Osborne said: “The conservatives support the basic human instinct to provide for your children and we believe that your home which you work for and you’ve saved for should belong to you and your family not the taxman.
We will take family homes out of inheritance tax. We will effectively increase the inheritance tax threshold to one million pounds so that only millionaires pay inheritance tax”
Osborne first launched the policy at the Conservative party conference of 2007. The resulting jump in support for the Tory party put Labour on the back foot, scaring Gordon Brown off calling a General Election that year.
Ukip have long been promising to scrap inheritance tax entirely, so this policy is also being seen as showing ankle to their voters.
Speaking to Breitbart London, Ukip Councillor and NEC member Tom Bursnall, who defected from the Conservatives to Ukip over the Tories’ economic policies, said “This is the same proposal that they didn’t deliver before, but worse in that the thresholds are the same despite eight years of property inflation.
“They say it wasn’t delivered because it was blocked by the Lib Dems; well, they have no chance of forming a majority government this time round so it’s not worth the paper it’s written on again.
“The policy also creates additional complexity in the tax code, because they now want to cut off the allowance at the top end of the property market. The Tories are against Labour’s mansion tax, but given Osborne’s punitive changes to stamp duty and now inheritance tax, any wealth creator with a large London property is going to be miles better off under Miliband.”
Critics have also pointed out that the plan is to be funded by scrapping tax relief on pension contributions of those earning £150,000 or more, again forcing the most financially successful Britons to shoulder a larger proportion of the tax load.
Jonathan Isaby, Chief Executive of the TaxPayers Alliance said that his organisation welcomed the tax cut, but insisted that it was important to scrutinize the funding, saying: “The Death Tax is fundamentally immoral, hitting families at the worst possible time, and any attempt to alleviate the burden is welcome.
“For too long, successive Chancellors have allowed more and more people to be dragged into the top band by refusing to move the thresholds, and correcting for that is well overdue. This is a welcome first step towards the abolition of the most hated tax in Britain, one that penalises people for working hard and trying to pass on a better life to their children and grandchildren.
“However, it’s important that we look at the detail of withdrawing tax relief from pension contributions, as there remain serious questions about how fair and indeed practical it is to do so.”