POLITICIANS and economists have reacted with outrage amid reports Rishi Sunak is drawing up plans to slash inheritance tax.

According to The Times, plans to cut the levy before eventually abolishing it entirely is intended as a crowd-pleasing announcement before next month’s Conservative Party conference.

Inheritance tax is charged at 40 per cent for estates worth more than £325,000 with an extra £175,000 allowance towards a main residence if it is passed to children or grandchildren.

A married couple can share their allowance, meaning parents can pass on £1 million to their children without any tax being paid.

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The Times reports that three separate sources have confirmed there is a live discussion about reforming inheritance tax.

One such proposal is for the PM to announce his intention to phase out the levy by reducing the 40 per cent inheritance tax in the budget in March, while setting out a pathway to abolish it completely in the future.

A source told the newspaper: “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.”

Another source described it as “the most hated tax in Britain, according to the polls” and that “people also feel it is just wrong to tax people on income that has already been taxed – and at a time when they are grieving”.

Reacting to the news on Twitter/X, SNP MP Gavin Newlands said: “Along with the utter inequity of this proposal, this is horrendous politics.

“The vast majority of folks paying inheritance tax are voting no matter what stare they are in.

“The voters they’ve lost to Lab since 2019, and whom they need to win back, do not pay inheritance tax.”

Elsewhere, economist Richard Murphy said: “Inheritance tax is almost entirely a charge on otherwise untaxed capital gains.

“So can we stop all the ridiculous claims being made that inheritance tax is about double taxation?

It’s about taxing something that would otherwise never be taxed. What’s unfair about that?”
The latest figures for the tax year showed only 3.73% of UK deaths resulted in an inheritance tax charge.

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However, Downing Street sources insisted formal plans were not being drawn up and pointed to Jeremy Hunt’s insistence that tax cuts are “virtually impossible” given the state of public finances.

Labour MP and shadow chief secretary to the Treasury 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.”