Cameron pledges to cut inheritance tax from 2017

A Conservative government would take family homes out of inheritance tax by introducing a new allowance effectively increasing the threshold to £1 million, David Cameron has announced.

In a message on Twitter tonight, Mr Cameron said: "The home that you've worked and saved for belongs to you and your family. We'll help you pass it on to your children."

In a speech on Sunday, Cameron is expected to say if the Tories win the May 7 election, parents will each be offered a new £175,000 allowance to enable them to pass property on to children tax-free after their death.

The new family home allowance will be transferable on the death of one spouse and can be added to the existing £325,000 transferable allowance to bring the tax-free total up to £1 million.

For properties worth more than £2 million, the allowance will be gradually tapered away, so that those with homes worth more than £2.35 million do not benefit at all.

Some 22,000 families are expected to benefit by 2020 from the pledge, which will be paid for by a £1 billion raid on pension tax relief for people earning more than £150,000.

The new allowance would come into effect in April 2017 and be available to married couples and civil partners, even if one of them has died before that date.