Prime Minister Andy Burnham has hinted that the current 40% inheritance tax rate could be abolished and replaced with a flat 10% death levy on all estates, as part of a sweeping reform of the social care system. The proposal, which Burnham first supported during his tenure as Health Secretary under Gordon Brown, would scrap the existing threshold of £325,000 above which inheritance tax is charged, instead taxing every estate at a lower rate.
Proposed Tax Change
Under the current system, estates valued over £325,000 are subject to a 40% tax upon death, but only on the amount exceeding the threshold. Burnham's new plan would impose a 10% tax on the entire estate value, effectively lowering the rate for larger estates while bringing smaller estates into the tax net. The prime minister argues that this would generate more revenue to fund long-term social care, preventing the National Health Service from being overwhelmed by patients who do not require acute hospital care.
Speaking through his official spokesperson, Burnham emphasised that creating a new system would take time but stressed the urgency of addressing the social care crisis. The spokesperson stated: “I’m just not going to get ahead of his update on this issue, which will come later in the week. And he has said in his interview today that creating a new system will take time. But he’s also been clear about the consequences of not doing it, which is that the NHS would collapse under the weight of having to care for people not really needed in the NHS system.”
Government Spokesperson Comments
The spokesperson added: “So you’ve seen his determination to tackle this issue, and I think that gives you a sense of where his feelings lie.” The comment suggests that Burnham is willing to expend significant political capital on social care reform, a policy area he has championed for years.
Industry experts note that a flat 10% death tax would simplify the inheritance tax system but could be controversial among families with modest estates who currently pay nothing. Under the current rules, estates below £325,000 are exempt, and married couples can pass on up to £650,000 tax-free. A universal 10% levy would therefore affect millions more households, potentially raising billions of pounds annually for social care.
DWP Secretary Weighs In
Department for Work and Pensions (DWP) Secretary Pat McFadden addressed the speculation during an interview on Sky News. McFadden said: “Andy Burnham is going to be talking about social care tomorrow. This is a subject that’s been close to his heart for many years… He is determined, as he said, to put political capital into this, to put political energy into this. So we have to wait to see what he says in his speech tomorrow.”
McFadden continued: “There has been lots of speculation about what it will mean. I can’t tell you today, but what I can tell you is that this is a long-term challenge that’s faced the country for an awful long time. It hasn’t really been tackled in a fundamental way yet, but he is determined that in his time as prime minister, he’s going to face up to this long-term challenge, and he’ll have more to say about that tomorrow.”
The prime minister’s full proposals are expected to be unveiled in a speech later this week, with further details on how the new death tax would be implemented and what exemptions or reliefs might apply. Critics warn that the change could be seen as a tax on grieving families, while supporters argue it is necessary to secure the future of social care.
