Under the plans supported by Shadow Chancellor John McDonnell, inheritance tax would be replaced by “lifetime gifts tax”. The current scheme has a threshold of £475,000 0r £950,000 for couples, only 640,000 households of the 27.2million households in the UK pay the tax each year. As reported by MailOnline, everything a child receives from their parents during life and death above £125,000 would be taxed.

The threshold would be set for each child, so two children could inherit an estate worth £250,000 tax-free.

Anything above the threshold would be taxed annually at income tax rates.

The Tories have claimed this plan could affect 10 million households according to Land Registry Data.

Mr McDonnell told Sky News: “We are looking at it and it might be one of those ideas, and we’re consulting on it at the moment.

“I think it’s interesting. We need to have a fairer system of how we can ensure that wealth is more fairly distributed, that’s one idea and we are listening to a whole range of ideas.”

Mr McDonnell ruled out another proposal in the Jon Trickett commissioned Land for the Many report which called for capital gains tax to be placed on all house transactions.

Brandon Lewis, Tory Party Chairman and former Housing Minister under David Cameron said: “This shows the truly shocking extent of Corbyn’s tax raid on homes.

“Over 10 million would be caught by Labour’s new tax grab, hammering families across the country.

“Only the Conservatives believe in lowering taxes and helping people achieve homeownership.”

Whilst Labour re-iterated the proposal was not yet formal policy, they said only 63 percent of homes in Britain are owner-occupied, so the suggestion 10 million households would be affected was too high, but the Tories have said owners of rented homes will still need to pay LGT.

The report claims the reforms would raise an extra £9.2billion for the Treasury than the current system.

In March, the average price of a British home was £226,798.

The report also called for the Tory inheritance tax break to be reversed: “Since implementing a lifetime gifts tax may take time, Labour’s plans to reverse the Conservative Government’s recent inheritance tax break for main residences is an important interim step.”

A Labour spokesman repeated the assertion the policy was not yet officially part of Labour’s plan should they form a Government but was under consideration and added: “As the report makes clear, Britain is a deeply unequal country and we need to start talking about that.”

A study by London based UHY, an international accounting network said that the UK and Ireland currently take the highest proportion of inheritance taxes of any major world economy.

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