British PM Cameron sets out plans to cut inheritance tax on homes

LONDON, July 4 (Reuters) - Prime Minister David Cameron outlined plans on Saturday to accelerate house-building over the next five years and raise the inheritance tax threshold on family homes to the psychologically important one million pound mark.

The plans include steps to build discounted homes for first time buyers, unlock public land for new homes and back small builders with planning changes.

Cameron and finance minister George Osborne were writing in the Times newspaper ahead of next Wednesday's budget, which will be the first time the newly elected Conservatives have been able to present a financial agenda free of the constraints of their previous, left-leaning Liberal Democrat coalition partners.

They have already said they plan to reduce borrowing faster this year and cut the annual welfare bill by 12 billion pounds($18.7 billion).

On Saturday, they confirmed that the threshold at which inheritance tax is levied will rise for couples to one million pounds from 650,000 pounds after April 2017.

The policy will be funded by limiting the amount of tax relief on pension contributions given to those earning more than 150,000 pounds a year.

Newspapers said Osborne will present the measures to parliament on Wednesday, although the Times article did not confirm they would form part of the budget speech.

Critics say the inheritance tax measure, which has long been a Conservative goal and was promised in their election manifesto, benefits only the wealthiest homeowners.

But Cameron and Osborne said in the Times: "It can only be right that when you've worked hard to own your own home, it will go to your family and not the taxman."

(Reporting by Stephen Addison; Editing by Clelia Oziel)