Homeowners with properties worth up to £1million will be able to pass them on to their children tax-free under plans drawn up by George Osborne, it was claimed last night. The Chancellor’s proposal is expected to become a key part of the Tory manifesto, but will not be included in tomorrow’s Budget after it was blocked by the Liberal Democrats. Plans to raise the inheritance threshold to £1million were included in the party’s manifesto at the last election, but were vetoed as part of the Coalition deal in 2010. Scroll down for video . Passing on properties: The tax break would mean just over 20,000 fewer estates would annually have any inheritance liability. A file photo of a road in Wandsworth, south-west London, is pictured . According to Treasury papers leaked to The Guardian, the proposed measures would also reduce the inheritance tax bill on properties worth up to £2million by £140,000. The tax break, which would mean just over 20,000 fewer estates would annually have any inheritance liability, is expected to cost nearly £1billion. In the papers, the officials note that the move ‘will generally be very popular with the public and in the media. It will allow you to say you are exempting those with modest homes from inheritance tax (with up to £1million of assets) exempted in certain circumstances.’ The document, prepared for Treasury financial secretary David Gauke, added: ‘You have indicated a desire to reduce the burden of inheritance tax. ‘Having considered the cost of a substantial increase in the existing nil rate band, you and the Chancellor have indicated you would like instead to introduce a more targeted measure to allow the family home to be passed onto the children of deceased without it leading to an inheritance tax liability. ‘This reflects the 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.’ Chancellor: George Osborne’s proposal is expected to become a key part of the Tory manifesto, but will not be included in tomorrow’s Budget after it was blocked by the Lib Dems (file picture of Mr Osborne in 2014) A senior Tory source blamed the leak of ‘old advice’ on the Lib Dems, adding: ‘They are desperate. There is nothing in the Budget on inheritance tax, which we have said repeatedly is an election issue.’ Another senior Conservative added: ‘Usually at this time we get leaks of what’s in the Budget. This is a leak of what’s not in the Budget.’ It is thought that the Lib Dems leaked the papers ahead of the Budget in a bid to paint to Tories as the party of the rich. The number of people who own a home worth more than £1million has risen dramatically, up 50 per cent since before the financial crash. A survey by property website Zoopla last year predicted that there would be 500,000 people owning a seven-figure property by 2015. While most are in London, there have been big rises in the south east and the south west, with smaller increases in Wales and Yorkshire.
Chancellor's proposal expected to become key part of Tory manifesto . Won't be included in tomorrow’s Budget after being blocked by Lib Dems . Inheritance tax bill on properties worth up to £2m 'reduced by £140,000'