Tories plan £2million break on inheritance tax

The Tories were accused of offering "tax cuts for millionaires" today as it emerged they plan to allow families to inherit up to £2 million tax-free.

Labour and the Liberal Democrats hit out at the proposals after they were revealed by shadow Commons leader Theresa May in a letter to a financial adviser.

The new inheritance tax limit would come about because couples would be entitled to a £1 million allowance per person, transferable to the surviving partner after their death.

Last year shadow chancellor George Osborne proposed raising the inheritance tax threshold at the Conservative Party's annual conference.

To loud cheers and applause from the party faithful he said: "The next Conservative-government will raise the inheritance tax threshold to £1 million."

The limit for couples was later doubled from £300,000 to £600,000 by Chancellor Alistair Darling.

It was claimed today that the Tory leadership had avoided publicising the fact the £1 million allowance would be transferable over concerns it could focus further attention on the party's economic plans.

The Daily Telegraph reported that a retired financial adviser, Clive Scott-Hopkins, had extracted the announcement from Ms May by pushing for details of the Tories' plans.

In her letter, she said: "I am happy to confirm that our inheritance tax proposal will introduce a threshold of £1 million per person (not per couple). This means that it would be possible for a married couple to enjoy a threshold of £2 million."

Following several years of rising house prices, many family estates in London have been taken over the present £600,000 limit.

Chief Secretary to the Treasury Yvette Cooper said: "When hardworking families are facing real pressure, how on earth can the Tories justify more tax cuts for millionaires?

"David Cameron has clearly tried to hide this but now we know the Tories' priority is to give money to a few thousand of the wealthiest estates in the country. How can this be fair?" Lib Dem Treasury spokesman Lord Oakeshott said: "This gives the lie to George Osborne's claims that the Tories are the party of fairness."

After Mr Darling's move in his pre-Budget report last October, married couples and civil partners now have a combined threshold of £600,000, rising to £700,000 by 2010. Labour claims that 97 per cent of UK homes are worth less than the new threshold of £600,000.

Mr Darling's announcement allowed 12 million married couples and civil partners to combine their allowances.

This means that when the second partner dies, inheritance tax will not be charged on the first £600,000 of their estate if none of the allowance was used when the first partner died - for example by leaving assets to children.