Scrap the unfair death tax

As we reported yesterday, Rishi Sunak and Jeremy Hunt are considering plans to cut inheritance tax (IHT) in the Autumn Statement next week. They have discussed reducing the rate at which it is levied from 40 per cent after Treasury officials concluded the move would not be inflationary. 

This week’s figures showing that prices are now rising at 4.6 per cent a year, down from more than 11 per cent at the last Autumn Statement, offer scope for the Chancellor to be more generous than he has so far indicated. 

Mr Hunt has been adamant he will do nothing that might encourage inflation but he needs to be bolder both for political and economic reasons. The Prime Minister may be right to think the country is anxious to see competence, pragmatism and maturity from its government, especially after the upheavals of recent years. But it also wants to see, after 13 years, an indication that the Tories are heading for a position that will show some clear blue water between them and Labour.

While IHT may be levied on relatively few estates, modest homes in London are now caught in the net. It penalises the prudent and family-minded, inhibits aspiration and is a tax on wealth that has already been taxed while being accumulated in life. Even people unlikely to pay it think it is unfair. The regime is also absurdly complicated and highly intrusive, allowing HMRC the right to delve into family finances. IHT raises about £7 billion a year, which is a small proportion of total revenues. 

If Mr Sunak and Mr Hunt are having serious discussions about its future, they need to go further than tinkering with rates. The Chancellor should take the opportunity to scrap it.