Andy Burnham, the Labour politician poised to become the next UK prime minister, has proposed abolishing the current inheritance tax system and replacing it with a new "care levy" intended to help fund adult social care. While the plan aims to address public dissatisfaction with inheritance tax and improve social care financing, analysts warn it could ultimately increase the tax burden on families.

Inheritance tax, often cited as one of Britain’s most disliked taxes, raised approximately £8.4 billion in 2024-25. Burnham has described the existing regime as widely resented and suggested scrapping it in favor of a levy explicitly earmarked for financing social care services. Social care costs in England totaled about £34.5 billion during the same period, four times the revenue from inheritance tax, and are projected to rise due to demographic shifts and increasing costs.

With the adult social care sector expected to grow from 1.3% of the UK’s GDP in 2023-24 to nearly double that by 2073-74, the proposed care levy would likely need to increase substantially over time to keep pace with demand. Some experts caution that while this approach reframes the tax as contributing to a tangible social need, it may lead to escalating payments that surpass current inheritance tax levels.

Critics also note that taxes labeled for a specific purpose often lose their earmarking over time. For example, National Insurance contributions, though associated with funding pensions and benefits, are not strictly ringfenced and are pooled with general tax revenue. A care levy could similarly become another form of estate taxation with a more appealing name but similar or greater financial impact on families.

Burnham has previously suggested other alternatives, including a 10% flat rate tax on all estates, which would extend liability beyond the wealthiest households. Some projections suggest that under such a system, the average family could face inheritance-related tax bills around £13,000, depending on estate size.

Both inheritance tax and social care funding have faced calls for reform for years. Previous governments, including those led by Theresa May, Boris Johnson, and George Osborne, struggled to implement lasting changes in either area. Burnham’s focus on these issues signals a willingness to address complex fiscal challenges, but financial experts advise families to consider restructuring wealth transfers sooner rather than later, as more generous tax allowances may not be forthcoming.

Financial planning under Burnham's proposals is expected to become more complicated rather than simpler, particularly for those wishing to minimize the impact of estate charges and possible future social care levies. Families with disposable assets may find it advantageous to make tax-free gifts in the near term, especially if they seek to avoid larger and more unpredictable levies in the long run.