Political intrigue in the UK gains momentum as talks emerged that Prime Minister Rishi Sunak is considering the possibility of reducing the unpopular inheritance tax ahead of the next general elections. The move would give his ruling party a significant advantage after recent polls showing the Conservative party with a double-digit deficit.
Sunak was already passionate about the topic when he was still the Chancellor of the Exchequer under Boris Johnson. Although the situation has changed dramatically since then, the pre-election task remains relevant.
He is now under pressure from his party to try to reduce the tax burden, which has risen to an all-time high, while also battling high inflation. Earlier, the prime minister said that he plans to fulfill the promise to cut taxes if inflation falls below 3% this year. However, in a recent interview, he said that he will do so after he has dealt with inflation, which now exceeds 10%.
Cutting inheritance taxes would primarily benefit the wealthier segments of the population, which could drive a wedge between the Conservatives and the Labor Party, who would be unlikely to agree to tax cuts benefiting rich citizens. This is a similar situation to when Hunt abolished lifetime pension contributions.
A YouGov poll back in October said 63% of respondents support raising the threshold at which inheritance tax begins to be paid. Now, the figure has increased to 77%, and most of them are Conservative voters. The data also said that 48% supports the full abolition of the tax.
Lowering the tax could change the game of Conservatives, but there is no concrete information on this matter. Some say the government could reduce the main rate to 40%, while others expect an increase in the threshold at which the tax begins to be paid.
In terms of the forex market, pound bulls continue to have control over the market. However, the quote has to consolidate above 1.2425 in order to trigger a much larger rise to 1.2470 and 1.2520. In case there is a decline, bears will attempt to take 1.2385, which could lead to a fall to 1.2340 and 1.2310.
Euro bulls also have a chance to continue a rally and update the highs, but in order to do so, the quote has to stay above 1.0960 and take control of 1.1000. This will allow a rise beyond 1.1035 and towards 1.1080. In case of a decline around 1.0960, the pair will fall further to 1.0930 and 1.0900.
