The provisional plans would also result in inheritance tax liabilities on properties worth up to £2m being reduced by £140,000.

If current inheritance tax rules were maintained until the conclusion of the next parliament, the number of estates subject to inheritance tax would be 56,1000 (just over 10 per cent of deaths overall); if the proposal was adopted, 34,300 would be subject (6.2 per cent of total deaths). As a result, the Treasury could lose almost £1bn every year.

The papers make it clear, however, that the new ‘nil’ rate band would only apply if the value of a home was transferred to a direct descendant of the deceased (children, step-children and adopted children).

According to a study published by Zoopla recently, the number of people who own a home worth more than £1m has risen dramatically since the financial crash, perhaps by as much as 50 per cent. The study forecasts that over half a million people will own a seven-figure property by the end of this year. The number of properties subject to inheritance tax has also grown, as inheritance tax thresholds have not risen in step with house prices since its introduction in 1986.

In the document, Treasury financial secretary David Gauke said the proposal was “a targeted measure to allow the family home to be passed onto the children of deceased without it leading to an inheritance tax liability,” and would  respond to “concern raised by the public about rising house prices increasingly leading to estates with a modest house – particularly in London and the South-East – paying inheritance tax.”

A spokesperson for the Conservatives, however, dismissed the validity of the leaked papers. “There is nothing in the Budget on inheritance tax,” they said, “which Mr. Osborne has said repeatedly is an election issue.”

Your Money readers can view the leaked document below: