Downing Street is currently holding talks about scrapping inheritance tax (IHT) as part of its manifesto ahead of the general election, as reported by The Times.
HMRC’s second update for 2023/24 revealed £1.2 billion was collected by the Treasury through the first two months of the 2023/24 Financial Year. It marked a 13% increase from the £1.1 billion raised by this point last year.
What’s more, the OBR’s latest forecasts suggest inheritance tax (IHT) will raise £7.2 billion this Financial Year and as much as £8.4 billion by 2027/28.
Recent news from April also revealed that Rishi Sunak said to be considering an inheritance tax cut ahead of the next general election but has said to be “pessimistic about the prospect of doing so given the level of inflation”.
Only “4% of deaths in the UK resulted in the paying of inheritance tax and it is only paid when the value of an estate is above the £325,000 threshold.”
Supporters have argued that the inheritance tax cut could be a “gamechanger” in blue wall seats in the south of England that the conservatives are defending.
Two senior government sources confirmed that there is discussion at the highest level of government about scrapping inheritance tax, as reported by The Times. They said it would be a manifesto pledge for the election.
A senior government source said:
“Inheritance tax feels very egregious to a lot of people. It just seems very unjust.
It is a wedge issue that it would be very hard for Labour to follow. It would also have far more impact politically than, say, cutting a couple of pence off the rate of income tax.
One of the challenges we face is that we’ve put a lot of effort in lifting people out of tax entirely, but we’ve got very little political credit for it. It is hard to get people to vote for the party of low taxation when they’re not paying tax at all in the first place.”
A No 10 source distanced Sunak from the discussions on inheritance tax, saying:
“The current economic situation means that [the] government is completely focused on halving inflation — to help people have more in their pockets at the end of each month.”
Paul Johnson, director of the Institute for Fiscal Studies think tank, said:
“This is absolutely not the time to be talking about tax cuts, either in the short term, medium term or long term,” he said.
The only way the government’s current plans add up is because they have pencilled in impossibly tight spending targets after the next election.”