Plans to slash inheritance tax at the Autumn Statement are reportedly being drawn up by No10 and the Treasury.
Prime Minister Rishi Sunak and Chancellor Jeremy Hunt could cut the rate down from its current level of 40 per cent at next week’s fiscal event, the Telegraph has reported.
It comes after calls for tax cuts from Conservative MPs have steadily grown in a bid to offer a boost to the electorate ahead of a general election and, they argue, fire up economic growth.
The report also follows yesterday’s news that Sunak has achieved his pledge to halve inflation before the end of 2023, as announced in a speech outlining his goals in January.
Other potential Autumn Statement measures could reportedly include the extension of full expensing — which the Confederation of British Industry (CBI) has called for.
Officials, according to the newspaper, believe the decision to cut inheritance tax – by a level yet to be decided upon — would not risk fuelling inflation which is a key test for Hunt.
This is because changes to the so-called ‘most hated tax in Britain’ are not thought to immediately filter through into the public’s spending patterns, unlike income tax cuts.
According to Hargreaves Lansdown, while less than four per cent of UK estates are currently subject to inheritance tax, the measure raised £5.7bn during the 2020-21 tax year.
Tax take varies regionally, with London estates paying the highest average of over £279,000.
Sarah Coles, head of personal finance, said inheritance tax was a “useful target” for the Treasury as “far more people are worried about it than actually end up paying it”.
She added: “It is likely to have less of an inflationary effect than something like cutting income tax. These are also lump sums people won’t necessarily spend.
“If you cut income tax, money goes back into their pocket on a monthly basis and gets quickly absorbed in everyday spending.”
And Coles noted: “Inheritances may be saved or invested for the long term, used to pay off debts, or spent on property – pushing property prices up rather than everyday prices.”
The latest Office for Budget Responsibility (OBR) figures are yet to be revealed and will indicate how much ‘fiscal headroom’ — or spare money — the Treasury has to spend.
John O’Connell, Taxpayers’ Alliance chief executive, said: “Families across Britain would welcome a cut to this unfair and unpopular tax”.
But he said it was still “a complicated charge full of loopholes which mean the wealthiest pay very little” and urged the chancellor to “abolish it entirely as part of a package of reforms”.
While a spokesperson for the New Economics Foundation (NEF) warned: “Reducing inheritance tax will starve our vital public services of desperately needed funding.”
The Prime Minister’s official spokesman said No10 did not comment on speculation ahead of fiscal events.