Andy Burnham is reportedly contemplating a new levy, often dubbed a “death tax,” aimed at generating substantial funds for adult social care. During his tenure as health secretary under Gordon Brown from 2009 to 2010, Burnham advocated for replacing the Inheritance Tax with a 10% charge on all estates to finance free social care.
When asked about his stance on this proposal, Burnham’s spokesperson stated that an update on the matter would be provided later in the week. Stressing the importance of establishing a new system, Burnham highlighted the potential strain on the NHS if the issue is not addressed promptly.
The upcoming Prime Minister is scheduled to address social care concerns this Wednesday, cautioning that an immediate timeline for action may not be feasible. Instead, there is speculation that an accelerated review of adult social care by the Casey Commission could be announced.
Currently, a small fraction of families are subject to the Inheritance Tax due to existing regulations and allowances. In the UK, around 31,500 estates face an Inheritance Tax obligation annually, triggered by estates valued above £325,000, attracting a 40% tax rate on the excess value.
However, certain exemptions and rules can significantly raise the threshold, such as leaving the estate to a spouse or civil partner, which eliminates the tax liability. Moreover, transferring a home to descendants can increase the threshold to £500,000 by adding a £175,000 allowance.
For couples, any unused Inheritance Tax allowance can be passed on, potentially enabling an estate to reach £1 million without being taxed. Various strategies exist to reduce the Inheritance Tax burden, including donating to charity or gifting assets within specific timeframes.
If a universal 10% levy on estates were implemented, a £100,000 estate would incur a £10,000 charge, contrasting with the current Inheritance Tax threshold of £325,000. Higher-valued estates would face increased tax liabilities under the proposed levy, with examples illustrating the potential impact on estate values.
Upcoming changes in pension regulations are expected to expand the scope of Inheritance Tax obligations, affecting thousands of estates. Inherited pensions will be subject to Inheritance Tax from 2027, leading to increased tax liabilities for beneficiaries and a higher number of estates falling under the tax bracket.
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