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Sunday, May 19, 2024
Sunday May 19, 2024
Sunday May 19, 2024

Controversy erupts as Rishi Sunak faces backlash for proposed tax cut targeting millionaires

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Rishi Sunak’s political maneuvering is causing quite the stir, as accusations fly about attempts to placate his own party with an “unfunded tax cut for millionaires.” The whispers of a Spring election swirl amidst speculation that the PM is eyeing the elimination of inheritance tax for the wealthiest families, signaling a significant shift in tax policy to boost the Tories’ prospects. However, skepticism abounds, even within his own ranks, with calls for focusing on tax cuts benefiting middle earners, while critics slam the move as “obscene.”

The forthcoming Budget announcement on March 6, earlier than usual, fuels speculation about a potential Spring election. Among the anticipated measures, Sunak is rumored to unveil a cut to inheritance tax, a move contentious for its implications.

Currently, the 40% inheritance tax applies to estates worth £325,000 or more, which rises to £500,000 if a property is passed on to direct descendants. This translates to a combined tax-free property limit of £1 million for a couple upon their death. However, only a small fraction, 3.7% of all deaths in 2020-21, incurred an inheritance tax charge, according to government figures.

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Criticism comes from various quarters. Paul Nowak of the TUC lambasted the idea, calling it “obscene” to grant a substantial tax cut to a minute but affluent minority when the populace grapples with living costs and strained public services. Labour dismissed the reports as a move by a desperate Prime Minister trying to mend an economy left damaged by previous Tory decisions.

Even Sunak’s own MPs expressed reservations. Some, like Neil O’Brien, emphasized the need for tax cuts benefiting low to middle earners, pinpointing income tax, fuel duty, council tax, and VAT as areas needing attention, rather than inheritance tax.

While the Chancellor, Jeremy Hunt, contemplated slashing the 40% inheritance tax rate in his Autumn Statement, he later deferred, opting instead for a 2p cut in national insurance rates in a bid to bolster Tory approval ratings. Now, reports suggest a revisitation of scrapping inheritance tax in the Spring Budget, alongside potential alterations in income tax thresholds.

The mooted elimination of inheritance tax draws a stark contrast with Labour’s stance and raises concerns about funding for essential services. The Institute for Fiscal Studies estimates the cost of scrapping inheritance tax at £7 billion initially, escalating to nearly £10 billion by 2028/29.

Amidst this speculation, critics continue to assail the government’s handling of the economy and public services, calling for a shift in policy direction. The Deputy Spokeswoman for Sunak declined to comment on the specifics, labeling discussions as “speculation” and reiterating the tax’s contribution toward funding vital public services.

The debates and uncertainties surrounding these potential tax shifts reflect a deep-seated tension between economic strategies and their societal repercussions, setting the stage for an intense political showdown.

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