In a move aimed at boosting the Conservative Party’s standing in the polls ahead of the election, Rishi Sunak is considering doing away with inheritance tax and enacting two significant adjustments to income tax in the coming weeks.
It is reported that in three months, Number 10 will debate introducing the cuts. The PM, according to sources who spoke to the Telegraph, has prioritised inflation over tax burden reduction and is now calling for a “gear change” in tax policy.
Apart from eliminating inheritance tax, the Treasury is also contemplating raising the threshold for individuals to begin paying income tax at the 40% rate and decreasing the standard 20% rate.
Inheritance tax is paid on estates worth over £325,000.
Earlier this year, figures from the Institute of Fiscal Studies showed that Inheritance Tax will raise £15 billion per year by 2032.
Analysis of the latest HMRC figures showed fewer than four per cent of estates paid inheritance tax between 2020 and 2021.
The number is expected to rise to more than seven per cent across the next ten years, as a result of the growth in wealth of older adults.
The IFS report said this year, the cost of abolishing Inheritance Tax would be £7 billion, but this would rise to £15 billion per year by 2032.
The report warned: “The 90 per cent or so of estates not paying inheritance tax would not be directly affected by such a reform.”
When cuts to inheritance tax were floated in September, ahead of the Autumn Statement, Labour criticised the plans.
Shadow Treasury Chief Secretary Darren Jones said: “A year ago, Liz Truss trashed the economy with unfunded tax cuts. Now Rishi Sunak is doing what Liz Truss wants.
“Abolishing inheritance tax – which 96 per cent of people never pay – is an unfunded tax cut of £7.2bn per year.
“The biggest threat to the economy is the Conservative Party.”