The Conservatives are looking at ways of easing the burden of inheritance tax, including the possibility of exempting a deceased person's main home from the 40 per cent levy, George Osborne, the shadow chancellor, said yesterday.
But he ruled out any early move to abolish inheritance tax, as proposed by Stephen Byers, one of Tony Blair's allies, saying that the Tories had to put economic stability before tax cuts.
An increase in property prices has resulted in a sharp increase in the number of estates in the UK paying inheritance tax - up by 72 per cent in the five years up to 2004, according to a recent study.
More than 30,451 estates, most worth less than £500,000, were liable for the tax. A further 22 per cent rise to 37,000 is expected by next year, according to Halifax, which carried out the study.
It is calling for the inheritance tax threshold to be raised to £430,000 in line with house price inflation.
The threshold for inheritance tax has risen by 85 per cent since 1996 - but the housing market has grown by 179 per cent. It is currently set at £285,000, though Gordon Brown, the Chancellor, has promised to increase it to £325,000 by 2010.
Mr Byers, the former transport minister, writing in The Sunday Telegraph, said that inheritance tax, which is expected to raise £3.6 billion this year, was a "tax on death" and called for it to be abolished. But he was immediately slapped down by supporters of the Chancellor, who dismissed calls to abolish the tax as "nonsense".
Mr Osborne, interviewed on BBC Radio 4's Today programme, was asked whether an incoming Conservative government would abolish inheritance tax. He said Mr Byers was right to argue that inheritance tax had become increasingly unfair. But he added that it would be an expensive tax to abolish and, as a possible future chancellor, it would be "irresponsible" for him to commit the Tories to scrapping it.
Mr Osborne said the Tories were looking at options for reforming inheritance tax. These included raising the threshold, cutting the rate, or exempting a person's primary home