The Tories announced plans to all but abolish stamp duty for first-time buyers today and raise the threshold for inheritance tax to £1 million in a bold pre-election sweetener funded by a levy on foreign millionaire tax-exiles.

The proposals from George Osborne, the Shadow Chancellor, won a noisy standing ovation at the Conservative Party conference in Blackpool, lifting the gloom after a series of opinion polls suggesting that Gordon Brown could win a landslide if he called a snap election.

Mr Osborne told delegates that a future Conservative government would abolish stamp duty on properties costing under £250,000, taking nine out of ten first-time buyers out of the stamp duty altogether.

That proposal had been widely flagged, but his next had not: raising the inheritance tax threshold to £1 million to make up for the effects of rampant house price inflation and ensure that "only millionaires will pay death duties".

The tax cuts would be paid for by a new £25,000 annual levy on around 150,000 people with 'non-domiciled offshore tax status', including not just Russian oligarchs like Roman Abramovich but foreign City workers and millionaires from around the world who have retired in the UK.

At the moment, inheritance tax is imposed at 40 per cent on estates valued at more than £300,000 but rising prices mean that a tax once aimed firmly at the rich is affecting working families across the country.

By the Conservatives' own calculations, those who own average homes in half of all local authorities are now eligible for inheritance tax. After the Tory reform, Kensington and Chelsea would the only borough in the country where average home-owners still face the tax.

Setting out a "new dividing line in British politics", Mr Osborne pledged: "We will take the family home out of inheritance tax. In a Conservative Britain you will not be punished for working hard and saving hard."

He added: "It is a mark about our seriousness about lower taxes that I will not promise unfunded, undeliverable tax giveaways to dress up a press conference in an autumn election campaign. For this party, lower taxes aren't just for Christmas, they are for life."

With tax cuts firmly back on the Tory agenda – displacing the touchy-feely 'mood music' of the past two years – Mr Osborne now has to persuade voters that they can be funded without hitting public services.

The party calculates that raising the inheritance tax threshold will cost around £3.1 billion a year, while the stamp duty reform would cost the Treasury £400 million.

Mr Osborne's advisers say that shortfall should be met by a new £25,000 levy on non-doms, who are believed to number around 200,0000, roughly half of them American. If only 150,000 of them paid the levy, it would raise enough to offset the Tory cuts.

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