RISHI Sunak has declined to comment on speculation that he is drawing up plans to slash inheritance tax.
The Prime Minister continued the Government's play-down of reports that there were live discussions at the highest level of government about reforms to cut the tax.
One proposal reportedly being considered is for Sunak to announce his intention to phase out the levy by reducing the 40% inheritance tax rate in the budget in March, while setting out a pathway to abolish it completely in future years.
Speaking to broadcasters at a community centre in Hertfordshire, the Prime Minister said: “I never would comment on tax speculation, of which there is always plenty. What I would say is that the most important tax cut I can deliver for the British people is not halve inflation.
“It is inflation that is putting up prices of things, inflation that is eating into people’s savings and making them feel poorer. And the quicker we get inflation down, the better for everybody.
“We are making progress, we saw that in the most recent numbers. The plan is working, but we have got to stick to the plan to bring inflation down and that is the best way to help people with the cost of living.”
Cabinet minister Grant Shapps told Sky News on Sunday: “I think it’s a question for many people of aspiration and people know that there’s something deeply unfair about being taxed all their lives and then being taxed in death as well.”
Chancellor Jeremy Hunt is in a “fiscal straitjacket”, Shapps said, indicating that immediate changes in November’s autumn statement were unlikely.
“You will certainly have to wait for a budget or another event for the Government to set out whatever the plans will be,” Shapps said.
“Generically I’m in favour of all taxes being lower, but we’ve got to be fiscally responsible.”
Defence Secretary Shapps’ father died in September and he said: “Unfortunately, I just lost a parent and I can understand entirely why people find inheritance tax particularly punitive.
“However, there are lots of different tax considerations for the Chancellor.”
Downing Street sources pointed to Hunt’s insistence that tax cuts are “virtually impossible” at the moment given the state of the public finances.
However, a senior government source told the Sunday Times: “No 10 political advisers have been looking at abolishing inheritance tax as something that might go in the manifesto.
“It’s not something we can afford to do yet.”
Inheritance tax is levied at 40%, but the vast majority of estates fall below the threshold – which can be up to £1 million for a couple – to incur the charge.
The latest figures, for the tax year 2020 to 2021, showed just 3.73% of UK deaths resulted in an inheritance tax (IHT) charge.
There has been pressure within the Tory Party to change or scrap IHT, with former prime minister Liz Truss among those calling for it to be axed.
The move would not be universally popular within the Tory ranks.
Former Cabinet minister Simon Clarke said: “If we are choosing our priorities for tax cuts, income tax should surely trump inheritance tax every time.”
While under 4% of UK estates pay IHT, “the great majority of those in work pay income tax”, he said.
“I understand why IHT is inherently resented, but at a time when we face profound problems of inter-generational unfairness – especially on housing – we should focus our ability to ease the burden on rewarding the value of work,” Sir Simon said.
Labour’s 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% of people never pay – is an unfunded tax cut of £7.2 billion per year.
“The biggest threat to the economy is the Conservative Party.”
He wrote to the Chancellor demanding answers on how any change might be paid for.
