Would you really benefit from a Tory plan to scrap inheritance tax?

With income tax, national insurance and corporation tax all rising under Rishi Sunak, the Conservative backbenches are revolting.

Desperate to make the case for lower taxes on family finances, former cabinet members including Nadhim Zahawi are calling for another tax to be abolished altogether - inheritance tax, or the so-called “tax on death”.

But does the case for scrapping it stack up? We take a look...

What did Nadhim Zahawi actually say? In a column for the Daily Telegraph, the former chancellor described the levy as “a spectre” that haunts Britain and warned it is “morally wrong to take someone’s assets on their death”. He also claimed it causes “distortions” in the way families handle their personal finances as they attempt to avoid leaving an inheritance tax bill.

Does anyone else in the Tory party agree? Yes. Zahawi already has the support of former home secretary Priti Patel and the poster boy of the Tory right, Jacob Rees-Mogg. Former minister Ranil Jayawardena has also added his support, saying: “We need to be bold and abolish inheritance tax altogether - no ifs, no buts. It’s a death tax.”

Why now? More than 50 Conservative MPs want the government to commit to this new policy before drawing up the manifesto for next year’s general election. They say action must be taken quickly because the threshold at which inheritance tax is paid has been frozen since 2010, and rising house prices mean that many families are now facing a bill after suffering a bereavement.

They’re right, aren’t they? Some might argue it can’t be fair to have so many people paying the tax. However, hardly anyone does. In the tax year 2019-20, the last for which data is currently available, only 3.7% of deaths in the UK resulted in an inheritance tax bill for their family.

Really? So how much would I need to leave behind for my family to face a tax bill? No tax is payable on any estate under £325,000, and assets left to a husband or wife are tax free. If a parent dies after inheriting the other parent’s estate then both allowances are passed on to surviving children. That means when a second parent dies, no inheritance is paid by children inheriting an estate of up to £650,000.

Are the numbers paying inheritance tax rising? Yes, in 2019-20 the number of deaths resulting in a charge rose by 900 to 23,000. But as a proportion of overall deaths, inheritance tax bills are actually declining, down from almost 5 per cent in 2016-17.

So the amount being brought in by the tax is decreasing? No, not at all. Thanks to rising house prices and other assets, the receipts to HMRC for 2021-22 were £6.1bn - an increase of 14 per cent on the previous year, and the largest single rise since 2015-16.

That seems a useful amount. Why get rid of it now? Talking about this policy helps to distract from something else that is rising - the number of people facing higher income taxes despite working under a Conservative government. Partly due to inflation, one in five workers are expected to be paying the higher 40 per cent rate of income tax by 2027. Experts have warned that Rishi Sunak's plans include the biggest tax rise in half a century.

Has anyone noticed? Yes - and it’s making some conservative policymakers very unhappy. Ryan Shorthouse, the chair and former director of the thinktank Bright Blue, wrote a letter to the Telegraph warning it was the “wrong policy” and that cutting taxes for working-age people should be the party’s priority - “especially for those on the lowest incomes”.

What is Rishi Sunak saying? In April, the prime minister said he was considering cuts to the tax, but has made no commitment to get rid of it altogether. Meanwhile Keir Starmer’s team are making plans to increase inheritance tax on the wealthiest estates if they win the general election next year.