Jeremy Hunt Faces Scrutiny Over Proposal to Reduce Inheritance Tax

2023-11-19 13:56:48

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Inheritance Tax Debate Heats Up As Hunt Faces Public Scrutiny

Jeremy Hunt, the UK's Chancellor of the Exchequer, found himself in the hot seat when asked to explain the reasoning behind potentially reducing inheritance tax for the affluent, especially when numerous households face daunting challenges in managing their finances.

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With the Autumn Statement around the corner, the chancellor is set to reveal tax and spending proposals before next year's general election. Among the speculated announcements is a significant cut to inheritance tax – a levy imposed on the estate of the deceased – potentially dropping from the current 40% to an astonishing 20%.

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The proposed tax cut is controversial, given that the Institute for Fiscal Studies (IFS) reported that less than 4% of estates were liable for inheritance tax in 2020–21, as it is only levied on wealth above a threshold amount.

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Tough Questions Posed to the Chancellor

During his appearance on the BBC’s Sunday with Laura Kuenssberg programme, the chancellor was presented with a direct question from a viewer: "Why change inheritance tax when you have the lower paid struggling to pay their bills?" The show's host pressed Hunt for his views on the potential cut and what it could imply about the modern Conservative Party in light of the current financial difficulties faced by many.

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In his defense, Hunt skilfully avoided a definite stance, stating that he would not be "drawn on any individual taxes" and humorously debunked rumors of eradicating taxes altogether, following speculative media reports.

Meanwhile, Rachel Reeves, the shadow chancellor, criticized the move as misguided amidst a severe cost of living crisis and deteriorating public services. She empathized with the desire to pass on wealth to offspring but insisted that now was not the appropriate time for such tax cuts. Despite this, Reeves did not pledge to reverse any implemented tax cuts if Labour were to come into power.

Financial Implications of Inheritance Tax Adjustments

The significance of the potential inheritance tax alterations becomes evident when considering the IFS's calculation that its complete abolition would induce a £5.7 billion shortfall in government funds. Notably, the greatest benefits of this tax cut would flow to the wealthiest, with the top 1% of estates, boasting values over £2.1 million, receiving an average windfall tax reduction of almost £900,000. Yet, the vast majority of estates that are not subjected to this tax would remain unaffected.

In essence, while the decision to reduce or possibly scrap inheritance tax can bring about a relief for some, the broader implications for income inequality and government revenues generate a complex and heated discussion.

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