How will Burnham’s 1.8% social care levy or 10% ‘death tax’ hit YOUR finances? Use our calculators to find out

ANDY Burnham is drawing up plans for a huge shake-up of how Britain pays for social care, with officials looking at two rival options that could hit millions of household budgets. The Prime Minister has ordered an accelerated Casey review into the crisis-hit sector, and Number 10 says he will not decide how to fund his reforms until it is published. Prime Minister Andy Burnham has raised the possibility of higher taxes Credit: PA The Casey Commission, led by Baroness Louise Casey (pictured), is an independent review launched to reform England’s adult social care system Credit: Reuters But insiders confirm at least two proposals are already in the mix, and both would mean big changes to your pay packet or your inheritance. The first is a new 1.8% “social insurance” levy on income, based on plans drawn up by Re:State, a think tank with links to Burnham. Sign up for the Money newsletter Thank you! The second is a flat 10% “death tax” on every estate in the country, scrapping inheritance tax altogether to help fund a new National Care Service. You can use our exclusive calculators below to work out exactly how each of these schemes will hit your pocket. The 1.8% levy Under the plans, workers over the age of 34 would face mandatory contributions on any income over £6,240, well below the current £12,570 tax-free Personal Allowance. The money raised would be invested and used to pay for the care of each generation once they reach old age, topped up by extra contributions from wealthier pensioners. For a typical full-time worker on the ONS average salary of £39,039, the levy would add £590.38 a year to their tax bill, working out at about £49.20 a month. That is in addition to £5,293.80 in income tax, £2,117.52 in National Insurance contributions and £1,639.95 in typical 5% auto-enrolment pension contributions. Most read in Money Because the levy would start at the pension auto-enrolment threshold rather than the personal allowance, almost all of an average earner’s income would be caught by it. Get FREE tax guidance about inheritance, property and capital gains worth £250 * If you click on this link we will earn affiliate revenue Are you sick of handing over your hard-earned cash to the taxman? You could slash your tax bill legitimately with the right planning, from inheritance tax on your home to savings and pensions. Award-winning financial advice firm Kellands Chartered Financial Planners are offering Sun Money readers a free one-hour consultation with their experts worth £250. Claim your free session today Kellands (Hale) Limited is authorised and regulated by the Financial Conduct Authority. FCA Firm Reference No: 193498 The 10% ‘death tax’ The other option being considered is far more radical. It would axe inheritance tax entirely and replace it with a flat 10% charge on every estate, to help fund the £18.7billion National Care Service. Right now, fewer than 5% of estates in Britain actually pay any inheritance tax, thanks to a £325,000 tax-free allowance plus an extra £175,000 for those leaving their main home to children or grandchildren. Married couples can currently pass on up to £1million between them without paying a penny. Burnham’s flat levy would sweep all of that away. Inheriting £50,000 would suddenly mean a £5,000 bill. Inheriting £100,000 would cost £10,000, and an estate worth £500,000 would face a £50,000 charge. Meanwhile, Britain’s biggest estates currently pay inheritance tax at 40%. Swapping that for a flat 10% with fewer reliefs could actually leave the very wealthiest better off. Burnham has form on this policy. He first proposed scrapping inheritance tax for a flat estate levy back in 2010 as Gordon Brown‘s Health Secretary, and it was rejected by voters. A similar plan, dubbed the “dementia tax,” is widely blamed for costing Theresa May her majority in 2017. No10 insists no final decision has been made, and any changes will follow the outcome of the Casey review. 11 comments11