In plans first leaked in a Treasury memo to the Guardian in March, the Conservatives said the party would pay for its inheritance tax plans by cutting pension tax relief for those earning over £150,000.
The current rate of inheritance tax is 40% on anything above a threshold of £325,000 for an individual and £650,000 for married couples and civil partners.
By introducing a ‘family home allowance’ of £175,000 per person to allow parents to pass on their family home to children tax-free after their death, the government would increase the tax threshold to £1m on properties for married couples, and to £500,000 for individuals.
Writing in the Times on Saturday, David Cameron and George Osborne said a change to the inheritance tax system would “give young people a foothold on the property ladder”.
“It can only be right that when you’ve worked hard to own your own home, it will go to your family and not the taxman,” they added.
Osborne is likely to announce the changes in his post-election emergency Budget on Wednesday, along with significant cuts to welfare benefits and further spending reductions and job losses for Whitehall.