Via Share the Facts, David Cameron explains our plans to take the family home out of Inheritance Tax:
And also via Share the Facts, the detail:
Many families who have worked hard, saved and put money into their home are caught by Inheritance Tax – a tax that should only be paid by the rich. It should not be paid by people who want to pass on the family home to their children.
So we are announcing that the next Conservative government will take the family home out of Inheritance Tax. We will introduce a new transferable ‘family home allowance’ of £175,000 per person. For a married couple, this will effectively increase the Inheritance Tax threshold to £1 million.
It will be paid for by restricting pension tax relief for those earning over £150,000.
The choice is now clear: if you work hard, save and want to pass on your family home to your children – vote Conservative.
We will increase the maximum Inheritance Tax allowance for married couples from £650,000 to £1 million by introducing a new £175,000 per person transferable allowance for people’s main residence when it is passed on to their children or grandchildren.
This will increase the maximum tax-free allowance for an individual from £325,000 to £500,000. Like the existing tax-free allowance, the new ‘family home allowance’ will be transferable between married couples and civil partners, so the maximum tax-free allowance for married couples will be increased from £650,000 to £1 million.
The new ‘family home allowance’ will be tapered away if people leave behind assets worth more than £2 million. For every extra £1 above £2 million the allowance will be reduced by 50p, so that it will be withdrawn entirely above £2.35 million. Those leaving behind more than this amount will be entirely unaffected by the new allowance.
This will cost £1.05 billion per year. It will be paid for by reducing the tax relief on pension contributions for people earning more than £150,000. The size of the annual allowance will be gradually reduced from £40,000 to £10,000 at incomes over £150,000. The annual allowance will be reduced by 50p for every £1 of income above £150,000, reaching £10,000 at incomes above £210,000. Pension contributions above the annual allowance are taxed at people’s marginal rate of income tax, which for those earning above £150,000 is 45 per cent.
This will be come into effect in April 2017. The full amount can be transferred even if one member of a married couple has died before the policy comes into effect and will benefit existing widows and widowers.