What do you think of Burnham's plans re inheritance tax?

[JoyousOpalLemur]

He has said in the past that he wants to abolish inheritance tax and replaced it with a social care levy on inherited assets, which will incorporate unused pensions.

I don't totally understand this if I'm honest - I think it means everyone will be dragged into the inheritance tax threshold, but it seems like a fairer tax than what currently exists, and it's there for a purpose (to fund social care).

What do you think?

https://www.independent.co.uk/money/burnham-prime-minister-money-taxes-mortgages-bonds-stamp-duty-b3001078.html

It’s definitely an interesting idea, but I’m not sure it would be popular. I’d be keen to see some figures to show whether this would bring in more money though, essentially it would be a smaller amount of every estate rather than a larger amount of a smaller number, so would be interested to see how the numbers measure up.

I just asked AI to explain if this would mean I would pay more or less inheritance tax and it said 'it could be more, less or about the same'.

Very helpful!

I was googling his possible policies and saw something about this levy starting at 10% on all estates, "but wealthier people would of course pay more".

Can't find this link now, my interpretation is that he'd put starting rate of 10% on everything, no nil band, and then increase it progressively. So change of name and adding all estates into scope. I see no world where Labour would actually reduce IHT in any shape or form, no matter how they call it.

A proposed 10% levy on all estates, rather than the current system where only about 5% of estates pay inheritance tax at all.
Current IHT raises about £8-9 billion a year.
Only a small minority of estates pay it because of generous thresholds, spouse exemptions and reliefs.
Around 600,000 people die in the UK each year.
If the average estate were, say, £250,000-£300,000, total estates passing on death would be in the region of £150-180 billion annually.
A flat 10% levy on that sort of tax base would produce roughly £15-18 billion a year before exemptions and avoidance.

The estimated cost of social care reform is £36bn by 2030, but Burnham's IHT plans aren't intended to fund this in its entirety.

I'm just pleased that someone is talking about social care and seems to want to tackle it, as it petrifies me. Talk needs action, though.

Burnham himself hasn't said this - he hasn't said much at all - but there's lots of speculation about it from commentators. Who knows?

The problem with the current system is, if you have a house/money etc you want to leave to your children it's a huge gamble. You might pop your clogs at a healthy 65 and they get the whole thing. You could suffer from debilitating Ill health (but still be capable of living and want to live) and need additional means tested care which means all the potential inheritance gets used up as for a lot of social care you have to spend your own assets first.
Everyone paying for social care out of inheritance tax spreads the load a lot more predictably and fairly IMO.

essentially it would be a smaller amount of every estate

Then it doesn’t matter how fair and sensible it might be, or how much it might raise, it will be immensely unpopular because no matter what it is that is being talked about, absolutely everyone who thinks there should be more tax available for funding social care or the NHS, education etc etc, ultimately thinks that it should be somebody else paying it and not them.

And agree with @Bloozie just opening up the conversation about paying for social care and the likelihood of costs going up is a good stepml. There needs to be a serious, adult conversation about how we pay for it that doesn't dissolve into fantasies about simple fixes (blaming migration, blaming Brexit) or emotional blackmail (old people being made to feel like a burden. World their whole lives etc. of course they did, of course they deserve care. It needs to be paid for)

IF it is true, I’d support this. Social Care provision is woeful and needs to be addressed. It doesn’t exactly meet the Labour mantra of “tax the rich” or “broadest shoulders” though, so I can’t see it happening? Who knows.

Interestingly inheritance tax is an outlier in this on thatz in general, the people who are most likely to benefit from inheritance are also the most likely to think it should be taxed. I'll see if I can find the survey later...
It's more likely to be unpopular with people wanting to leave property to their children I suspect although of course those people wouldn't be directly affected by the tax themselves (due to how inheritance works).

It's a Labour Policy - you will be paying more tax.

I do think it makes sense that the recipient of the legacy should be taxed rather than the estate at source. It would encourage people to have more beneficiaries.

So it's passed the Turing test then ...

He has said this

.Burnham has taken a nuanced approach to wealth taxes, pledging to scrap inheritance tax and replace it with a social care levy.

As health secretary from 2009 to 2010, Burnham argued in favour of charging a flat 10 per cent levy on all estates on death to pay for free social care for all.
The idea resurfaced in 2023, when he said:
“I would abolish inheritance tax in its current form, but replace it with a care levy which everybody would pay — but obviously the wealthiest would pay the most.”
He reaffirmed his support for the proposal at his campaign launch, saying:
“I’ve long believed we should have a different way for paying for care.”

The people the country needs to stay will leave.

They should look at the Fair Deal Scheme in Ireland that is used to fund nursing home care. If you choose this method, you pay 80% of your income, 7.5% of cash assets and 7.5% of value of your property assets each year for the cost of your nursing home .You can apply for a loan from the state so house doesn’t have to be sold and loan is collected from your estate. It allows for people with assets to be admitted pretty quickly to nursing home if they need it, their partner can stay living in the house and state fully funds anyone with no assets.

Why? This policy is more everyone picking up the slack. The income comes from the 95% of estates that don't currently pay anything. People with £500k estates tend not to have quite so much flexibility on moving abroad. especially post brexit.

They can't take their land with them. Either they sell up or keep it and pass it on to someone when they die (as they are entitled to do you can own UK land outside the UK). At which point inheritance tax is paid.
It isn't a tax on "the rich" it's a staggered levy on all inheritances. If someone decided to leave the country in response and take their money then that also means they won't be in the UK when they become unwell and need social care. So that person is not costing the UK money on social care bills. So it balances out overall.

It isn't about punishing people. In a sense it's about requiring someone have insurance to pay for their care needs but taking the costs for that insurance on death. It's ironic that the same people who believe the NHS isn't fit for purpose and should switch to an insurance system can think of 100 reasons why introducing a compulsory insurance aspect to social care is so unworkable.

That's fine. But it also leads to huge discrepancies between the younger generation based only on whose parents needed to be in a care home, and whose parents didn't. Since most older people would prefer to leave their kids something rather than nothing, allowing people to hedge against the lottery which is old age health would be "fairer". The Irish system is definitely better than nothing though.

AI can’t tell you whether you’d pay more or less tax under the proposal, because it’s not a worked up proposal. It’s easy to suggest tax changes when you’re not being held accountable to those changes as you don’t have the power to do anything about them. It will change once you take a more detailed and informed look.

Historically, we’re not great with a hypothecated tax and have got rid of almost all of them, so I’m dubious of any tax that is earmarked for social care in this way. The current IHT take is already paying for different things - what happens to that funding?

The average person will pay more under a flat rate, the wealthy would pay less. My very wealthy clients would love a flat 10% rate and probably would stop structuring to get around it - but they’d still be paying less than they would currently with structuring.

@Persephonia1966 surely the principle is that you use your income/assets to fund your cost of living and whatever is left goes to your dependents?

Doesn’t sound a great scheme to me!

Inheritance tax needs to be reformed to make it fairer. One of the richest men in the world, King Charles is exempt from inheritance tax.

Its a 10% tax on everybody
Why would ‘people the country needs to stay ‘ leave?

Its a much lower tax take on those whose estates are currently taxed

It would remove the disincentive to save that the current system has. Currently if you don't give a shit you get free care and if you are careful you get expensive care. This would give everyone free care and 10% doesn't feel high enough to drive an adverse incentive to provide for your kids when you're gone.

the thing I disagree with on IHT is the deceased has already paid tax on those assets - income tax, stamp duty, capital gains etc., so I fundamentally disagree that their beneficiaries should also pay tax out of the estate. I know the beneficiaries themselves didn’t already pay tax on the assets, but I think it’s reasonable that parents want to leave something to their children. I know that doesn’t get round the issue of funding social care but I still disagree with IHT conceptually.