Rishi Sunak ‘considering scrapping inheritance tax’ ahead of general election

Rishi Sunak is reportedly considering scrapping inheritance tax in March as the prime minister scrambles to appeal to voters ahead of next year’s general election.

While talk of axing the levy – paid by just 4 per cent of households – failed to materialise in Jeremy Hunt’s autumn statement, there are now suggestions that the tax remains in the chancellor’s sights ahead of his Budget in three months’ time.

Floundering 20 points behind Labour in the polls, Mr Hunt is expected to use every inch of fiscal headroom to appeal to voters as rampant inflation finally falls below 5 per cent – with the prime minister reported to have ordered a “gear change” on tax as a result.

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As well as plans to help first-time property buyers, Downing Street is reportedly considering a range of tax cuts, including cutting the basic 20 per cent rate of income tax, raising the 40 per cent threshold, and scrapping inheritance tax.

Given the latter move is the least likely of the three moves to be matched by Labour, it is viewed as potentially creating the tax “dividing line” craved by Tory election strategists, according to The Daily Telegraph, which has campaigned for the levy to be cut.

Inheritance tax is owed on the part of someone’s estate above the tax-free threshold of £325,000, which can rise to £500,000 if a home is given to a child or grandchild. The current rate is 40 per cent. Scrapping the tax would cost the Treasury around £8bn a year.

Despite Mr Hunt producing the largest single package of tax giveaways since the 1980s in his autumn statement, the tax burden under the Conservatives is still set to rise to its highest level since the Second World War.

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The chancellor – who announced on Wednesday that his upcoming Budget will be on 6 March – was left with just £13bn to spare after the autumn statement, less than half of the room for manoeuvre enjoyed by any of his six predecessors since 2010.

While a further hit to growth could plunge his fiscal headroom lower still, recent estimates forecast lower-than-expected interest rates on government debt could turn the chancellor’s fortunes around somewhat.

Alongside claims of possible tax cuts, the housing secretary Michael Gove told The Times on Wednesday that help for first-time property buyers would “definitely” form part of the Tories’ pre-election appeal to voters.

Ministers are reportedly exploring a US-style scheme to provide government support fixed-term mortgages of more than 25 years to cut deposit costs, or resurrecting a form of the Help to Buy scheme, which was closed to new prospective owners last year.

The plans are expected to be announced either in Mr Hunt’s March Budget or in the Tory election manifesto. Home ownership is seen as a key electoral battleground, with YouGov polling for The Times finding that just 11 per cent of 24- to 49-year-olds say they will support the Tories.

But Labour is also drawing up housing pledges, with shadow minister Matthew Pennycook promising on Wednesday that Labour would “slash the discounts” on the Tories’ Right to Buy scheme back to 2012 levels for long-term inhabitants of social housing.

Sir Keir’s party would also raise the surcharge on stamp duty for non-residents from 2 to 3 per cent, and hand the estimated £25m raised to local authorities to hire 300 new planners in a bid to reverse the decline caused by public spending cuts.