Rishi Sunak and Jeremy Hunt have considered cutting inheritance tax for the Autumn Statement. Photo: AFP via Getty Images/Jessica Taylor
Downing Street is considering scrapping inheritance tax in three months as part of an election bid to boost Rishi Sunak's chances of winning.
The move is one of few major tax cuts discussed by senior figures in Number 10.
The Prime Minister ordered a “gear switch” on taxation, making reducing inflation, rather than cutting the tax burden, a priority at the start of his premiership.Other cuts being considered include raising the threshold at which people start paying the 40 per cent rate of income tax and reducing the basic 20 per cent rate.
But scrapping inheritance tax is the least likely of the three steps to be taken by Labour. potentially creating a tax. the “dividing line” that Conservative election strategists craved.
Tory MPs who had been calling for tax cuts welcomed the news, with one calling inheritance tax “immoral” as it is often applied to income that was previously taxed.
The Tories are also keen to attract his side with younger voters. promising to lower the initial cost of a home for first-time buyers.
Michael Gove, the housing secretary, told The Times that the government plans to initially offer much longer government support. urgent mortgage to reduce the cost of the deposit.
News that significant tax cuts are planned for March may help calm Tory nerves. It comes after Tory MPs clashed over the Rwandan deportation bill earlier this month.
Mr Sunak faces a challenge in the new year as he tries to keep Tory MPs united and reinvigorate Conservative voters disillusioned with the government.
Inheritance tax cuts were seriously considered in the Autumn Statement in November, but instead, it announced tax changes aimed more directly at stimulating economic growth.
The Telegraph campaigned for the abolition of inheritance tax.
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The Tories enter the election year some 20 percentage points behind Labor in the opinion polls – a margin that, if repeated on polling day, would give Sir Keir Starmer an overwhelming majority in the House of Commons.
Labour leader has told his shadow cabinet he must be prepared for a snap election in the spring, and his team is wary of signs that the autumn vote is likely to be suspect.
Tory election strategists see reputation restored conservatives. for tax cuts after years of seeing rising tax burdens as a key element of his campaign.
The overall tax burden is approaching its highest level in about 70 years, with many taxes being frozen. thresholds used to recoup money spent during the Covid pandemic.
But in November's autumn statement, Mr Sunak and Chancellor Jeremy Hunt signaled a change in approach, offering the biggest package of tax cuts since the 1980s .
It focused on measures to stimulate economic growth, including National Insurance for employees being cut and businesses being given a full cost investment tax cut.
The budget expected in March – likely to be the final financial statement before the next election – will be aimed at winning over voters, according to Tory insiders involved in the package .
Although only four per cent of households pay inheritance tax, according to HMRC data for 2021, Conservative pollsters have found that many more families view it with disdain.
Inheritance tax is levied on someone's person. property above the tax-free threshold, which is £325,000. This amount could rise to £500,000 if the house is passed on to a child or grandchild.
The current inheritance tax rate is 40 percent. Abolishing the tax entirely would create a hole in the Treasury's finances of around £8 billion a year.
If the move were to happen, it is unclear exactly when it would begin. Tax cuts announced in the Budget often come into effect in April, the start of each financial year.
The Treasury will speed up preparations for them. The budget, when it returns in the new year, may be limited in its flexibility due to the lack of financial reserve.
Mr Hunt was left with a cushion of just £13 billion, although still meeting his debt reduction targets following his autumn announcement. . That's half the average fiscal cushion since 2010.
This means that an unexpected deterioration in the economic outlook (such as a slowdown in growth after interest rates rise this year) could limit the room for desired tax cuts.
But recent forecasts predict that interest rates paid on government debt will fall. to be lower than expected suggests Mr Hunt may have billions of pounds more to spend than was estimated last month.
The news that cuts to inheritance and income taxes are being considered in the Budget has been welcomed by some Tory MPs.
Ranil Jayawardena, a former cabinet minister and chairman of the Conservative Growth Group, said: “Time is ticking. and the government must be bold. It's time to repeal the death tax.
“It's a double tax because it's a tax on money that's already been taxed, and it adds pressure during the saddest and most stressful times. It is the least popular of the taxes among people of all incomes because it is anti-wishful, anti-family, and just plain unfair. This has to go.
Of course, the government should try to reform income tax to make it more family-friendly. Married couples and civil partners should have fully transferable income tax relief, which will especially help working-age parents with children when family finances are most tested. Let's reward people who try to do the right thing.”
David Jones, a former Welsh minister, said: “Income tax and inheritance tax need to be cut. In particular, the inheritance tax should be abolished. It is an immoral tax on assets that have been largely accumulated from taxable income. In my experience, it is perhaps the most hated tax of all.”
In the autumn, some Conservative MPs pushed for a cut in income tax rather than inheritance tax, arguing that it benefits workers rather than those who has personal wealth. was wiser.
The next general election is due to be held by January 2025 at the latest, but many expect a date to be chosen next autumn. Mr Sunak will have to decide the timing.
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