The government is considering axing inheritance tax in three months’ time to boost chances of a Conservative victory at the upcoming general election.
The Prime Minister, Rishi Sunak, has ordered a “gear change” on tax, after prioritising lessening inflation earlier in his tenure as PM rather than reducing the tax burden,according to The Telegraph.
These considerations come after figures from HM Revenue and Customs indicated that this tax was on track for “another record-breaking year”.
HMRC reported that IHT receipts for April 2023 to October 2023 were £4.6bn, an increase of £0.5bn when compared with the same period in the previous year.
However, these plans to scrap inheritance tax could cost the government a significant amount of revenue. with previous analysis examining the effect of raising the inheritance tax threshold.
Analysis from Quilter has found that increasing the threshold to £500,000 and removing the residence nil rate band could cost the Treasury £6bn from 2024/25 to 2027/28.
Currently, inheritance tax affects a person’s estate above the tax-free threshold of £325,000 and the standard tax rate for the part of the estate which is in excess of this value is 40 per cent.
Additional considerations
The scrapping of inheritance tax is just one of a handful of major tax cuts that are reportedly being discussed by those at Downing Street.
The Telegraph also reported that increasing the threshold at which people start paying the 40 per cent rate of income tax and reducing the basic 20 per cent tax rate are under discussion.
The paper added that the axing of inheritance tax is the “least likely” of the three options to be matched by the opposition which could create a “tax dividing line”.
This all comes after an inheritance tax cut was considered by Jeremy Hunt for November’s autumn statement but which never materialised.
FT Adviser approached The Treasury but it declined to comment.
tom.dunstan@ft.com
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