Chancellor Jeremy Hunt is under pressure from his fellow ministers to slash inheritance tax (IHT) in the Autumn Statement.
Government officials say the top taxman has been looking at reducing the levy for some time, as it continues to be unpopular with voters.
Mr Hunt was asked about a possible IHT cut in Parliament on Tuesday but he told MPs they would have to “wait until next week” to hear his decision.
Insiders think a cut to the tax is feasible as it won’t contribute to inflation. As reported in the Financial Times, one official said: “When you inherit an estate, you don’t tend to liquidate it straight away and spend all the money.”
Policy planners are reportedly looking at binning the unpopular tax entirely with a rate reduction next week acting as a first step towards this.
An inheritance tax bill can often be for tens of thousand of pounds with the 40 percent levy applying to any inherited assets above certain thresholds.
The tax applies to any total assets above £325,000 inherited from a single person and above £650,000 inherited from a couple.
The Treasury took in an additional £739million in inheritance tax receipts in the financial year 2020 to 2021 compared to the previous year.
Analysis from probate group Final Duties found the taxman pocketed a total of £5.57billion in IHT during the year, affecting almost 27,000 estates, with an average bill of £213,485.
Finance experts said previously that the Chancellor has more leeway to announce tax cuts after Government borrowing was less than expected this year.
Mr Hunt may also be feeling more generous after inflation fell sharply fell month-on-month for the year to October, dropping to 4.6 percent.
Julian Jessop, economics fellow at the Institute of Economic Affairs, said: “The sharp fall means that inflation is back on track to the Bank of England’s two percent target next year.
“This should slam the door on any further increases in interest rates and bring forward the timing of the first cut. The sharp drop also fulfils the Prime Minister’s target of halving inflation and removes at least one obstacle to tax cuts in the Autumn Statement.
“These are likely to focus on business taxes, with any big changes in personal taxes held back until the Budget in the Spring.”
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