Andy Burnham, the Labour MP for Makerfield and potential future Prime Minister, has confirmed his intention to abolish inheritance tax (IHT) entirely, a tax described by experts as the country's "most-hated." Speaking about his plans, Burnham advocates replacing IHT with a flat 10 percent levy on all estates upon death to fund free social care, a proposal he first championed while serving as health secretary from 2009 to 2010.
Burnham's Proposal for a Care Levy
Burnham reiterated his stance in 2023, stating: "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." Under this system, a £500,000 estate would incur a £50,000 charge, regardless of how it is passed on. This contrasts with the current IHT framework, where estates not left to direct descendants face a 40 percent tax on amounts above the £325,000 nil-rate band. For a £500,000 estate, this would result in a £70,000 tax bill. However, if a qualifying home is left to direct descendants, an additional £175,000 residence nil-rate band may apply, potentially eliminating IHT entirely for estates up to £500,000.
Political Context and Chancellor's Remarks
The announcement comes as Burnham positions himself for a potential move to Number 10 Downing Street. Chancellor Rachel Reeves, acknowledging her likely departure, commented on Thursday: "I know that whoever is prime minister and chancellor in the future will inherit a stronger economy than the one I inherited two years ago." She added: "Those are the choices that the new prime minister, I hope Andy Burnham, will get to make in a few weeks time. I'm not going to pre-empt those. It is his prerogative as prime minister to make those appointments."
Impact on Estates
The proposed care levy would simplify the current system, ensuring all estates contribute a flat 10 percent, with the wealthiest paying the most in absolute terms. According to tax experts, inheritance tax remains deeply unpopular, and Burnham's plan aims to address public sentiment while funding essential social care services.
