Jeremy Hunt shelves plans to cut inheritance tax again ahead of his Spring Budget due to tight public finances

• The Chancellor decided tight public finances leave him unable to make changes 

Jeremy Hunt has shelved plans to slash inheritance tax at next month’s Budget after officials warned he will have only limited room for cuts.

In a blow to Tory MPs campaigning on the issue, the Chancellor has concluded tight public finances leave him unable to make meaningful changes to the tax.

One source familiar with the Budget discussions said cutting it would be ‘prohibitively expensive given the position we are in’.

The Chancellor has been considering proposals for radical reform of inheritance tax for months, including slashing the headline 40 per cent rate by half, raising the starting threshold or even a total abolition.

The idea was dropped from the Autumn Statement in November after Mr Hunt and Rishi Sunak decided to focus on cutting National Insurance and business taxes. It was then revived for preliminary discussions around next month’s Budget, but now looks certain to be shelved again.

Chancellor Jeremy Hunt leaves Downing Street with the dispatch box to present his spring budget to parliament on March 15, 2023

Prime Minister Rishi Sunak (L) and Jeremy Hunt (R) reacting during Prime Minister’s Questions (PMQs), in the House of Commons on November 29, 2023

Tory sources said inheritance tax reform could still be promised in the party’s election manifesto. But action to reform it is now unlikely before the election.

Conservative MPs had pushed Mr Hunt to take radical action on the tax, regularly named as Britain’s most hated tariff.

Former business secretary Sir Jacob Rees-Mogg said scrapping it would re-establish the Tories’ low-tax credentials and create a clear division with Labour and the Liberal Democrats, particularly in the South where most inheritance tax is paid.

Sir Jacob said: ‘Abolishing inheritance tax is affordable, economically beneficial and politically powerful. It would be such clear statement of the Conservative Party’s approach to taxation which the opposition parties would promise to reverse.’

But, with the Office for Budget Responsibility (OBR) warning Mr Hunt is likely to have less than £15billion of ‘headroom’ before breaking his fiscal rules, he has decided the £7billion price tag is too high.

The Chancellor is looking to free up a further £5billion by curbing planned spending after the general election.

But Treasury sources said he would also have to leave himself a cushion of at least £6billion against his fiscal rules, leaving him little room for manoeuvre.

Mr Hunt has all-but ruled out lifting the freeze on fuel duty, which could raise up to £5billion, but which is seen as politically toxic in an election year.

The PM and Chancellor will thrash out the final package next week, but measures are likely to be focused again on boosting growth and helping those in work deal with the cost of living squeeze.

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