Chancellor Jeremy Hunt is under pressure from his fellow ministers to cut inheritance tax (IHT) in the Autumn Statement.
Government officials say the tax chief has been looking at reducing the levy for some time, as it remains popular among voters.
Mr Hunt was asked about the possible IHT cut in Parliament on Tuesday but told MPs they would have to “wait until next week” to hear his decision.
Insiders think that it is possible to cut the tax because it will not contribute to inflation. As reported in the Financial Timesone official said: “When you inherit an estate, you don’t usually liquidate it immediately and spend all the money.”
It is reported that policy planners are looking at fully passing the mislocal tax with a reduction in the rate next week acting as a first step towards that.
An inheritance tax bill is often in the thousands of pounds and the 40 per cent levy applies to any inherited assets above certain thresholds.
The tax applies to any total assets over £325,000 inherited by a single person and over £650,000 inherited by a couple.
The Exchequer took in an extra £739 million in inheritance tax receipts in the 2020 to 2021 financial year compared to the previous year.
Analysis from the probate group Final Duties the taxman pocketed a total of £5.57 billion in IHT during the year, affecting almost 27,000 estates, with an average bill of £213,485.
Financial experts have previously said the chancellor has more leeway to announce tax cuts after the Government borrowed less than expected this year.
Mr Hunt may also be feeling more generous when inflation fell sharply month-on-month for the year to October, falling to 4.6 per cent.
Julian Jessop, economist fellow at the Institute for Economic Affairs, said: “The sharp fall means that inflation is coming back to the Bank of England’s two per cent target next year.
“This should prevent any further increases in interest rates and give the timing of the first cut. The sharp drop also meets the Prime Minister’s target of halving inflation and removes at least one hurdle to tax cuts in the Autumn Statement.
“These are likely to focus on business taxes, with any major changes to personal taxes being held back until the Spring Budget.”
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