The Prime Minister said one of his priorities is to “cut people’s taxes” in a clear signal that the government is looking to ease the burden on personal finances.
National insurance has already been slashed by two per cent this month, shaving off around £450 each year for 27 million average salaried workers on £35,400.
And Mr Sunak suggested his Chancellor will take the axe to taxes when he delivers the Spring Budget on March 6.
“I want people to have the peace of mind that the future is better for them,” he told broadcasters during a political visit to Eastleigh on Friday.
“And the fact that our plan is working, that we are now able to start cutting taxes because of our management of the economy, should give people that confidence that the future will be better for them.”
“And that is what I want to see happening in the future too.”
Mr Sunak’s comments come after Jeremy Hunt dropped further hints about a tax-cutting Budget while attending the World Economic Forum in Davos, Switzerland.
The Chancellor said on Thursday that the “the direction of travel” was for the UK to emulate successful low-tax economies.
It is widely expected that Mr Hunt will focus on income tax in six weeks time.
Mr Sunak added: “We said that we do want to cut taxes for future events when we can responsibly do so.
“Our priorities are very clear. It is controlling spending and welfare so that we can cut people’s taxes.”
“The plan is working, because we are already doing it – stick with it and there is more to come.”
Hopes of further tax cuts have been boosted by tumbling inflation, which is now at four per cent – less than was forecast last Autumn.
It means the UK’s debt interest payments are much lower than expected, giving rise to hopes that the Chancellor has more “fiscal headroom” ahead of this year’s budget.
Mr Hunt will be given the first of four forecasts from the Office of Budget Responsibility next week as he prepares for the crunch financial showpiece.
A Tory source said: “It’s a positive sign that debt interest is a lot lower than expected but it’s a fine balance as to how much headroom there is.”
“We will always cut taxes when it is affordable to do so – which it is now – and Labour will never do that.”
He is understood to be considering cutting or reforming Inheritance tax.
The Treasury has drawn up plans to halve the rate of inheritance tax, which is charged at 40 per cent for estates worth more than £325,000, with an extra £175,000 allowance towards a main residence if it is passed to children or grandchildren.
A cut to 30 per cent has also been considered.
But this has provoked criticism from some in the Tory party, particularly from MPs in red-wall seats, because of concerns that it will mainly benefit the rich.
Abolishing inheritance tax would cost £7 billion a year, but cutting income tax by 2p in the pound would cost £13.7 billion a year.
It comes as it emerged Sir Keir Starmer is ditching his much-maligned flagship promise to spend an extra £28 billion every year on green policies.
Labour insiders said the “mission” to ramp up clean energy production with a massive borrowing hike had become “an albatross around our neck”.
The Tories have slammed the pledge, warning it will either see spiralling debt or increased taxes to meet the target.
