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

Tax has to hit the normal people to raise enough though

It's going to bring millions into the taxation system though when previously they weren't taxed.

IHT is a bit of a mysterious tax because although only about 5% of estates pay it, people seem to absolutely hate it. Even the ones who won't pay it.

Not only that but the super rich aren't going to pay a penny.

Major changes to the tax system are always problematic and usually end up being "tweaked" to deal with the entirely foreseeable "unforeseen" consequences. It's why we've had so many minor "tweaks" to the tax system over the past couple of decades as Gordon Brown made a few absolute howlers of cock ups and subsequent Chancellors have been frightened of making big changes. Look at Reeve's cock ups with pension funds, IHT, private school VAT, WFA, National Insurance - basically everything she touched was a cock up because she didn't think things through. A major change to IHT such as the proposed 10% IHT WILL be a cock up and WILL cause lots of unforeseen consequences. Ironically, it's something that in theory I agree with, but I don't believe it would be introduced properly nor fairly and that those with the largest estates will still find themselves mostly exempt due to prior IHT planning strategies that Burnham won't be able to reverse.

It has to be raised fairly. I.e. target the people with the most who can afford to pay it. The last thing we need is any more stupid politics of spite, hate and envy that we suffered under Reeves, Raynor and Starmer. We need policies grounded in the real World, rather than to "punish" certain demographics who the politicians of the day hate. I have little confidence that Burnham is different enough to Reeves/Raynor/Starmer to change the way they think.

I also hate the default "solution" to always being raise more tax. How about reducing spending, how about reducing waste, how about growing the economy, how about increasing efficiency? So many other ways to start sorting out the country's problems rather than the lazy way of "tax more"!

You mean their children ?

@GasPanicIHT is despised and many don’t actually understand it.

@BadbadbunnyI agree with you that the tax burden needs to be spread aa fairly as possible but currently it is too weighted on income which disproportionately impacts younger people.
We have an ageing population and that costs big time, we can’t support our healthcare and pensions models with demographics as they are. Successive governments have ignored this and here we are. People are going to have to pay more tax even with cuts unfortunately because the vast majority haven’t paid enough.

We desperately need to grow the economy and again successive governments have struggled with this since the crash. Again ageing populations hamper growth, I’m not sure what the solution is.

You can’t target the super rich without global initiatives because they are the mobile ones.

Re your last paragraph

I think it’s a benefit to those as they won’t have to pay extortionate amounts in care home fees
( should they need one)
which no one can know atm.

It also means they don’t have to top up Govn fees for those that don’t pay.

Everyone that has assets pays in

Draining your estate dry every year ( and I apreciate the average stay is 2 years) can be very stressful
No one has to worry with this policy

@Snoopymayhemit seems fairer to me for the majority to pay something

You aren't going to change that by making vastly more people liable for it.

I have missed one thing out, and that is the fact that currently if you have assets they can be seized for providing care (down to some 20K limit).

I presume when this tax comes in that will no longer be the case. So from someone with significant assets (in a national sense), say 500K, your 10% contribution "insures" you against having your entire estate eaten up in care costs. Again this doesn't benefit the lower end, as they largely have no estate to be eaten up in care costs anyway, so their 10% gets them comparatively less.

TBH I am not sure what is wrong with the system at the moment. At the moment anyone who has money gets it seized to pay for end of life care, anyone that doesn't obviously can't because they don't have any. If there is anything wrong surely it is in the tax dodging of higher value estates which would be a better thing to focus on.

If the current system is forcing more people into the NHS rather than residential care, that's an issue for the system to resolve. Ultimately the long term care of people is going to need to be paid for one way or another.

I believe a big problem is that the majority need care in the home as opposed to a care home. Care in the home doesn’t include house value in any means testing and the area is severely underfunded, not enough workers etc. Plus not everyone in a care home self funds (and not just because they have no assets) which again puts pressure on local authority’s. The demand on social care and lack of provision is having a knock on impact on the NHS eg bed blocking.

The policy isn’t one whereby they assess your estate prior to care

They won’t be looking at your estate at all until you are dead and liable for IHT

Everyones estate on death simply gets taxed and the money put in a pot (not literally of course ) and that pot pays for everyones care

It’s completely different from now
There will be no cost assessments

The problem with the system now is that
-councils don’t have the money to pay for those without assets or those who’ve used them all up in care home fees already
-because councils don’t have the money those that pay are billed higher fees to top up the low council payments
-adult social care is also growing for non pensioners and councils are going bankrupt with the total bill for all

Inheritance tax avoidance is a problem

I do wonder if care in the home will come out of the same pot though

Theres no mention, however, in the policy Burnham favours

People in other European countries on lower and middle incomes pay more tax than here (higher earners on paye are in line) and businesses pay higher social security taxes. People want similar services but for someone else to pay.

You often see the line the we have the lowest pensions in Europe but that ignores the fact that many European countries don’t have a flat rate like we do and what you get is based on what you pay in and there isn’t the same culture of private workplace pensions.

@SnoopymayhemI know Teresa May tried to address this years ago but it made her deeply unpopular. It will be interesting if it is left out of Burnhams idea as it is problem.

I don’t think enough people realise quite how demographics have changed and the impact of this.

I think that the tax burden is spread more widely in lots of other European countries too, i.e. lower tax free allowances and bands so more people pay tax and pay higher rates at lower income levels. I.e. basically those with small to average incomes pay more on the continent in lots of places compared to the UK. However, in the UK, workers on higher incomes pay more than comparable workers in other places in Europe.

In the UK, we've relatively high tax free allowances and a relatively low basic rate tax, but relatively high "workers taxes" such as NIC which isn't applied to none workers, i.e. pensioners, interest/dividend income, buy to let incomes, etc.

By taking more low income earners out of tax, and reducing basic rate, we've basically pushed the higher burden of tax onto middle and higher earners already, over the past 2/3 decades.

A quick and easy way to spread the burden would be to scrap NIC and increase income tax instead so that everyone on the same income pays the same tax, so no different rates for different income types. Get the numbers right and workers would pay the same, but non workers would, rightly, pay more, to equalise and create true fairness.

Agree
I’m not convinced people care enough when they are required to pay
But Ultimately it’s not money people need when they are dead and
ultimately it will benefit everyone as councils will have more money
but
no one wants to pay more tax
and
more traditional Labour voters will be hit by this policy who may, unfortunately, not see the benefit to them now.

Only my MIL needed care. it ate away at her money and she was in constant stress about what happens when it ran out.

We can all avoid that with a fairer policy

I think people DO realise, but they just want someone else to pay. The usual hypocracy around benefits and tax. Always "someone else" to pay, never themselves!

I don’t know, a lot of posters seem to think the feckless are still popping out 6 dc or they don’t realise how much of the welfare bill goes to pensioners, lots of talk about paying into “my pot” etc.

They should absolutely scrap NI tax and just have one tax @BadbadbunnyI don’t know why they won’t tbh

I think this sounds fair. However there is no way it will apply to everyone as it will be too unpopular - which is why successive governments have failed to sort this out. Theresa May would have won the 2017 election by a strong margin had she not announced a social care policy at the very start of her campaign- it was downhill fast after that.

Everyone wants free social care and for the cost/tax to be borne by people with more wealth than them.

If Burnham can actually do this fairly (I.e. everyone paying a bit, and no one disincentivised to save) then hats off to him. But I expect he'll fudge it.

It strikes me though that the main problems are with the system.

Councils should be funded enough.
There should be enough places at reasonable cost and no private businesses should be able to hike prices to force better profits.
People should not be billed higher fees to pay for others.

At the moment there is an argument that a lot of people are going into the NHS at greater expense rather than care homes, but if that didn't happen then that would mean (a potential) transfer of money from the NHS to the LAs.

I think the issues with the system are better fixed first than just to blunder in with taxation changes without actually fixing the problems with the system.

From a popularity standpoint, Burnham would be better off fixing council funding through property taxes (something that has been suggested he might do) and using that to increase the care provision, while making sure enough homes are built to house everyone at reasonable cost and getting the system working properly rather than imposing 10% death taxes on the poorest of society.

Agree
-we need more respite care to stop bed blocking

-a limit on hospital stays once you don’t need medical care

Businesses have to make a profit and unless councils build care homes we are stuck with that

( I often wonder, as an aside, if the NHS provision should just be for medical care. ie
why aren’t people charged for food whilst in hospital ? )

The 10% death tax is just that. When you’re dead Youre not poor or rich. You are dead, so it’s not a tax on the poorest in society although I agree those that aren’t currently liable won’t be in favour of it. But those that are atm arent either
Its not a popular tax but it doesn’t actually affect any of us during our lives

@Snoopymayhem

we need more respite care to stop bed blocking

We also need hospitals to be more efficient. My DH has just spent several days in hospital, awaiting an urgent (but not emergency) orthopaedic operation. It was all "planned" in advance, i.e. pre-arranged date of admission etc.

First two days, barely anything happened, just "obs" every few hours, blood tests, an x-ray, ecg, etc. Being passed from pillar to post, by lots of different staff all doing just "one" thing at a time. Operation came and went in a single day - the only thing that was efficient! Next day was re-hab and physiotherapy. Then we hit Friday afternoon!

Told he was ready for discharge Friday lunch time. Started packing, etc. Told they were just waiting for the discharge paperwork and prescription drugs to take away. Friday afternoon came and went. Still there overnight. Literally nothing over the weekend except for obs every few hours. Bed blocking! Whenever he asked, the nurses always said they'd "ask the doctor" but nothing actually happened. He said they all seemed to think that such delays was just "the way it is"!

Come Monday morning things started moving again, but still waiting on the discharge paperwork and prescription. Finally "escaped" Tuesday afternoon. So that was FOUR extra unnecessary days/nights taking up a hospital bed for literally no reason, other than NHS admin inefficiency. Over that weekend, he kept hearing the nurses saying how A&E was log jammed, and when visiting I saw typically 4/5 ambulances waiting outside A&E with patients inside. DH said that the nurses kept saying that the hospital didn't have a single empty bed for anyone from A&E to be admitted. Yet he was there, taking up a bed unnecessarily!

It's SO much more than bed blocking due to social care problems!