Andy Burnham’s £18billion ‘death tax’ is the ultimate betrayal of working-class strivers – here’s everyone who’ll be hit

DEATH and taxes may be life’s only certainties, but Andy Burnham wants to make sure you get hit by both at once. The Prime Minister is dusting off a proposal her first cooked up back in 2010 as Gordon Brown’s Health Secretary – a plan the country rejected the first time around. The idea? Scrap inheritance tax and replace it with a flat 10% levy on every estate in the land to fund an £18.7billion National Care Service. Dressed up as state compassion, opponents say it is nothing more than a shameless stealth raid on hard-working families. Sign up for the Money newsletter Thank you! Yes, social care desperately needs reform. Elderly patients are trapped in hospital beds with nowhere to go, and families are routinely forced to sell homes they spent a lifetime paying off because council support cuts off at just £23,250. But critics say the answer to a broken system isn’t reaching into the pockets of everyone who saved and did the right thing. The Government must tackle waste and mismanagement first – and accept that taxpayers shouldn’t be expected to pick up the entire tab for everyone, regardless of what they can comfortably contribute themselves. Who would be dragged into the net? Here is the bitter truth Downing Street would rather you didn’t notice. Right now, inheritance tax only touches a small minority of deaths in this country. Most read in Money In the most recent tax year on record, fewer than 5% of estates – around 31,500 – actually paid any inheritance tax, bringing in approximately £6.7billion to the Treasury. This is largely down to how inheritance tax is currently set. Everyone has a £325,000 tax-free allowance, known as the nil-rate band. People who leave their main home to their children or grandchildren may also receive an extra allowance of up to £175,000, provided the estate is worth less than £2million. Together, these allowances can let someone pass on up to £500,000 tax-free. Unused allowances can also be transferred to a surviving spouse or civil partner. This means a couple may be able to leave up to £1million without paying inheritance tax. Meanwhile, very wealthy people can legally reduce their bills through trusts, offshore arrangements and gifts made during their lifetime. Under the seven-year rule, a gift is generally free from inheritance tax if the person who gave it lives for another seven years. As a result, most families with an ordinary home and savings pay no inheritance tax at all. Burnham’s plans for a flat levy would change all of that overnight. Strip away those carefully balanced reliefs, and you drag hundreds of thousands more families a year into the death tax net for the very first time. We are not talking about oligarchs and hedge fund billionaires here. We are talking about retired nurses, jobbing plumbers, shopkeepers and factory foremen whose only real asset is the house they scrimped and saved to pay off. If these thresholds were to be removed, a flat 10% charge would take a devastating bite out of modest nest eggs. Inheriting £50,000 would suddenly come with a £5,000 tax bill. Inheriting £100,000 would cost £10,000. An estate of £200,000 would take a £20,000 hit, £300,000 would incur a £30,000 charge, and leaving £500,000 would slap grieving families with a staggering £50,000 demand. The millionaire’s discount hiding in plain sight While ordinary families get pulled into paying death duties for the first time in their lives, the genuinely wealthy could actually end up better off. Britain’s biggest estates currently face inheritance tax at a hefty 40%. Swap that for a flat 10% with hardly any reliefs to bother with, and the mansion-owning, offshore-trust-holding end of the market is laughing all the way to the funeral. Working people who have never used a tax accountant in their lives will get clobbered for the first time. The ultra-wealthy will get a massive discount. That is not levelling up. Taxed one, taxed twice, taxed on the way out This is exactly why the double taxation argument bites so hard. Everyone hit by this new levy will already have paid income tax on their wages, National Insurance on top, and VAT on practically everything they ever bought with what was left. They will have paid stamp duty on the house and council tax for every single year they lived in it. Now Burnham wants a final slice taken the moment they die, from whatever they managed to hang on to after the taxman has had his fill for sixty or seventy years running. That is not a fair contribution to social care. That is the state helping itself to money it has already taxed once, simply because it has run out of better ideas. The sum’s don’t even add up Let’s be brutally honest about what this policy would actually deliver, because the numbers paint a strange story. Run Burnham’s scheme through official OBR-style modelling and a flat 10% levy would raise around £50billion over four years, against a care service costing £60billion over the same period. That leaves a gaping black hole of roughly £13billion to £17billion a year that has to come from somewhere else entirely. It would mean further tax rises, spending cuts elsewhere, or simply piling it onto the national credit card. Public debt would be more than £51billion higher by 2030, and gilt yields would climb. Interest payments on that extra borrowing would themselves cost taxpayers over £1.5billion a year by the end of the decade. This is not a self-financing reform. It is a punishing tax rise that does not even cover its own bill, with working families left to make up the shortfall for a policy sold to them as a fix for social care. Rejected three times, and counting Voters have already told Burnham exactly what they think of this idea in 2010. And a strikingly similar version, dubbed the “dementia tax,” is widely credited with costing Theresa May her majority in 2017. Yet here it comes again, recycled and repackaged, as though voters simply forgot to notice last time. We have not forgotten. And hard-working families should not be asked to pay for a Prime Minister’s unfinished business from fifteen years ago with the family home they have spent their whole life paying for. Comment now