The Government has confirmed it will press ahead with plans to drop inheritance tax for family homes worth up to £1m, funded by reductions in pensions tax relief.
Writing in The Times ahead of this week’s Budget, Prime Minister David Cameron and Chancellor George Osborne said the plans were critical to building “a homeowning Britain”.
Cameron and Osborne also promised more detail on reforms to the planning system next week as part of a productivity plan to improve the supply of housing stock.
“It is unacceptable, for example, that many councils are still not close to having a plan for delivering the homes their communities need,” the pair said.
“We will take action, in consultation with local communities, to deliver the plans for those areas which have failed to do so.”
The statement reaffirms the Government’s commitment to principles first unveiled during the election campaign as part of the Conservatives’ manifesto.
At the time, the Tories said the changes would come into effect from April 2017, and would see the individual IHT threshold raised from £325,000 to £500,000 when property is included, giving a married couple a shared £1m threshold.
Reduced allowances will be offered for properties worth more than £2m, with those worth upwards of £2.35m seeing no change.
The move is funded by a tapering of tax relief on pensions contributions for those earning more than £150,000, with those earning £210,000 able to contribute just £10,000 to their pension on a tax-free basis.
The plans have proved controversial, and the Institute For Fiscal Studies has said the change would “disproportionately” benefit those on higher incomes.
It said: “Since the children of those with very large estates are disproportionately towards the top of the income distribution the gains from this (and in fact any) IHT cut will also go disproportionately to those towards the top of the income distribution.”