Grant Shapps: Inheritance tax is ‘punitive and unfair’

Grant Shapps, pictured on Sunday,
Grant Shapps, pictured on Sunday, said that for many people the issue of inheritance tax was a question of 'aspiration' - Hollie Adams/Reuters

Inheritance tax is “punitive and unfair”, a Cabinet minister has said, amid reports Rishi Sunak, the Prime Minister, is considering cutting the levy.

The tax is levied at 40 per cent and is paid on estates worth more than £1 million for a couple.

Mr Shapps, the Defence Secretary, told Sky News on Sunday that for many people the issue of inheritance tax was a question of “aspiration”.

One official has dubbed it “the most hated tax in Britain”.

However, both Downing Street and the Treasury cautioned against expecting an announcement soon.

They pointed out that Jeremy Hunt, the Chancellor, said as recently as last week that there is no room for tax cuts in November’s Autumn Statement.

One idea is for a two-stage abolition of the levy, with it being reduced in the March Budget – before the Tories go into an election with plans to scrap it entirely.

A government source said: “This is not something that is being currently looked at.”

However, Mr Shapps said: “People know that there’s something deeply unfair about being taxed all their lives and then being taxed in death as well.”

He added that as someone who had lost a parent recently – his father, aged 91, died earlier this month – he understood why people may feel inheritance tax is “particularly punitive”.

“It’s right that every single tax is kept under consideration. I think that inheritance tax is particularly punitive and unfair,” Mr Shapps said.

“But we also understand that we are in a fiscal straitjacket and the Chancellor said only last week that he doesn’t see room for tax cuts.”

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

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

‘Too early to speculate on tax cuts’

One government source told The Sunday Times: “No 10 political advisers have been looking at abolishing inheritance tax as something that might get in the manifesto. It’s not something we can afford to do yet.”

But another said on Sunday: “The fiscal picture is very difficult as Jeremy keeps saying. I think now is too early to speculate on tax cuts.”

Separately, Downing Street seems set on fighting the next election with a pledge to keep the pension “triple lock”.

Mr Sunak has decided to commit to the policy even though experts believe it could add up to £45 billion a year to the welfare bill by 2050.

But, despite the expense, private polling has found that voters’ reaction to the idea of axing the policy has been so negative that Tory strategists have ruled out any changes.

The lock ensures that pensions rise along with inflation, earnings or 2.5 per cent – whichever is higher.

One source told The Mail on Sunday: “The rise in wages and inflation has made it a very expensive measure, but the political cost of abolishing it would be higher. Suicidal.”

Plans to tackle the problem of funding social care for the elderly have also been ditched, for fear of repeating the “dementia tax” fiasco which derailed Theresa May’s 2017 election campaign.

A government spokesman said: “We are committed to the triple lock.

“As is the usual process, the Secretary of State [for Work and Pensions, Mel Stride] will conduct his statutory annual review of benefits and state pensions in the autumn, using the most recent data available, and we won’t pre-empt that.”

He added: “We don’t comment on speculation around future manifesto commitments.”