Rishi Sunak and Jeremy Hunt have drawn up plans to cut inheritance tax at next week’s Autumn Statement, The Telegraph understands.
The Prime Minister and Chancellor have discussed cutting the rate from 40 per cent after months of publicly downplaying expectations.
Treasury officials have concluded the move would not be inflationary, meaning it passes a critical test that Mr Hunt has set for tax cuts this autumn.
It was confirmed on Wednesday that Mr Sunak has delivered his promise to halve inflation this year, one of five priorities announced in a speech in January.
Reducing the inheritance tax rate would be welcomed by Tory backbenchers who have been lobbying for cuts to kick-start economic growth, with some threatening not to vote for the Autumn Statement if it raises taxes.
A final decision on whether to cut inheritance tax and by how much will be taken by Mr Sunak and Mr Hunt next week.
Final Office of Budget Responsibility figures are due, which will reveal how much money the Treasury has to spend.
But one source familiar with discussions said the policy was now “likely” to be announced on Nov 22, rather than delayed to the Budget next spring.
Economists at JP Morgan said that Mr Hunt has enough room to cut taxes by as much as £10 billion.
The Telegraph has been campaigning to abolish inheritance tax, which critics often dub the tax the “least popular in Britain” and argue it amounts to taxing income twice.
Earlier this year more than 50 Conservative MPs joined this newspaper in demanding that Mr Sunak scrap the “morally wrong” tax.
Current rate of 40pc could be reduced
Inheritance tax is charged on the part of someone’s estate which is above the tax-free threshold, which is currently £325,000.
That can increase to £500,000 if a person gives away their home to their children or grandchildren. A home can be passed to a spouse without paying inheritance tax.
The current inheritance tax rate is 40 per cent. Cutting that by 10 percentage points would cost a few billion pounds, which is potentially affordable with the money Mr Hunt has spare while still hitting his target of debt falling within five years.
The move would be touted by Mr Sunak as proof that he wants to lower taxes and framed as a result of his careful management of the public finances since entering Number 10 last October.
The Office for National Statistics has said that inflation in the year to October was 4.6 per cent, down from 10.7 per cent in the year to January.
Sunak ‘shares ambition to cut taxes for working people’
Mr Sunak insisted he wanted to continue reducing inflation, saying: “While it is welcome news that prices are no longer rising as quickly, we know many people are continuing to struggle, which is why we must stay the course to continue to get inflation all the way back down to 2 per cent.”
William Turner is a seasoned U.K. correspondent with a deep understanding of domestic affairs. With a passion for British politics and culture, he provides insightful analysis and comprehensive coverage of events within the United Kingdom.
