Andy Burnham is reportedly contemplating a potential “death tax” initiative to generate substantial funds for adult social care. During his tenure as health secretary under Gordon Brown from 2009 to 2010, Burnham advocated for replacing Inheritance Tax with a 10% estate levy to finance free social care.
When questioned about his stance on this proposal, Burnham’s spokesperson indicated that details would be provided later in the week. Burnham emphasized the necessity of establishing a new system to prevent overwhelming the NHS with patients who do not require NHS services.
The upcoming Prime Minister is scheduled to address social care matters on Wednesday but cautioned in a recent BBC interview that a specific timeline for implementation was not immediately available. Instead of immediate changes, the PM may accelerate the Casey Commission’s review of adult social care.
Currently, a small number of families are subject to Inheritance Tax due to existing regulations and exemptions. Around 31,500 estates are liable for Inheritance Tax annually in the UK, triggered by estates exceeding £325,000 in value, with a 40% tax rate applied above this threshold.
Certain circumstances allow for higher thresholds, such as leaving an estate to a spouse or civil partner, which may result in no Inheritance Tax liability. Additional allowances, like a £175,000 exemption for passing on a home to descendants, can increase the overall threshold to £500,000.
Unused Inheritance Tax allowances can be transferred between married couples or civil partners, potentially allowing an estate of up to £1 million to avoid Inheritance Tax. Various strategies exist to minimize Inheritance Tax payments, including charitable bequests and specific gifting rules.
Introducing a 10% estate levy would mean a £100,000 estate would incur a £10,000 tax. Comparatively, under current Inheritance Tax rules, an estate valued at £400,000 without exemptions would pay £30,000, whereas with a 10% levy, the tax liability would be £40,000.
Starting next year, more families may fall under Inheritance Tax as pensions will be included for the first time. Inherited pensions will be subject to Income Tax after age 75 and Inheritance Tax from April 2027, affecting an estimated 10,500 estates and increasing tax obligations for 38,500 estates compared to previous regulations.
