The conservative party announced that they would end inheritance tax on homes valued at £1m ($1.46m) or less, in the run up to the 2015 election.

The conservatives plan to give a £500,000 family home allowance per parent, enabling children to inherit homes of up to £1m in value without paying tax.

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Currently there is an allowance of £325,000 per person. Any wealth that is transferred over that threshold is subject to a 40% tax rate.

For properties worth more than £2m, the new allowance would be gradually reduced so that those with homes worth more than £2.35m would not benefit at all.

The proposed policy is likely to cost in the region of £1bn and will be paid for by reducing tax relief on pension contributions from individuals earning more than £150,000.

George Osbourne, UK chancellor of the exchequer, told BBC One’s Andrew Marr Show: "Conservatives support the basic human instinct to provide for your children. And we believe that your home that you’ve worked for and you’ve saved for should belong to you and your family, not the tax man.

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"So we will take family homes out of inheritance tax, we will effectively increase the inheritance tax threshold to £1m, so that only millionaires pay inheritance tax."

However, Chris Leslie, shadow treasury secretary for the Labour party, claimed the move would disproportionately benefit wealthier members of society:

"At a time when our NHS is in crisis and most working people are paying more under the Tories, it cannot be a priority to spend £1bn on a policy which the Treasury says would not apply to 90% of estates."

The plans come as property prices have steadily risen in London and the south-east of England, leaving many more people liable to paying inheritance tax. However, critics say that the move could further inflate the property market.

The announcement comes after the Labour party revealed plans to end the UK non-domicile policy.