250,000 London homes could escape inheritance tax trap under Tory plan

 
Capital approach: Grant Shapps said the reform would help Londoners keep homes they had worked for
Glenn Copus
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Up to 250,000 homes in London could escape the inheritance tax trap under Conservative plans, leading estate agents say.

The capital and the South-East will be the biggest winners from the Tory proposal to raise the inheritance tax threshold to £1 million.

It contrasts sharply with Labour’s plan to impose a mansion tax on properties worth more than £2 million.

Tory chairman Grant Shapps stressed his party’s proposals would mean the taxman would “not get his hands” on family properties being passed on to the next generation across the capital.

Savills estimates that up to 250,000 in the capital may no longer be caught by inheritance tax under the reform.

Lucian Cook, Savills’ director of residential research, said: “The plan to increase the inheritance tax threshold will be of the greatest benefit to mature homeowners in London and its hinterland.

“We estimate that there are in the order of a quarter of a million owner-occupied homes worth between £650,000 and £2.35 million in the capital alone, though given the ownership profile of these homes clearly not all of them face inheritance tax concerns in the short to medium term.”

The Conservatives are promising to raise the current individual tax-free allowance on inheritance tax from £325,000 to £500,000 when a property is involved, so the threshold for a married couple rises to £1 million.

The allowance tapers off for estates worth more than £2 million, so those above £2.35 million do not benefit.

David Cameron pledged before the 2010 election that the Conservatives would raise the threshold at which 40 percent inheritance tax on estates starts being paid to £1 million.

But Lib-Dems blocked the move, so there is an effective threshold of £650,000 for married couples.

Mr Shapps told The Standard: “That home Londoners worked and saved for belongs to them and their families. And with the Conservatives, the taxman will not get his hands on it.

“Labour have promised a new tax on the family home that would disproportionately harm families in London [and] the South-East.”

Labour dismissed the announcement as the “latest panicky promise” from the Conservatives, adding: “The Tories made a promise on inheritance tax before the last election and broke it.”

Conservatives would aim to bring in the reform, costing around £1 billion, in April 2017. It would be paid for by reducing tax relief on pension contributions for people earning above £150,000.

Boris Johnson said: “We must stop the injustice by which London families are forced by inheritance tax to sell off the family home... because it was their fate to grow up in London.”

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