Kirk Rice Blog

Andy Burnham’s care levy proposal: Could a New Inheritance Tax Be the Future of Social Care Funding?Written on July 29, 2026 by Michael Powell

Michael Powell – Financial Planning Partner

Few areas of financial planning generate as much concern as inheritance tax. Yet recent discussion surrounding Prime Minister Andy Burnham’s long-standing proposal for a National Care Service has brought a different question into focus:

Should part of a person’s estate be used to fund social care for everyone?

What is Andy Burnham’s care levy idea?

At the moment, financial help with adult social care costs is based on your assets and savings. If you have less than £14,250 savings and assets the local authority will organise and pay the costs of care. If you have more than that you will contribute towards the costs; and if you have £23,250 or more, you will pay your own way.

The local authority will provide the same needs assessment to all groups without charge; then signpost or introduce you to suitable care services. Self funders (people in the third group needing care) make their own decisions about which service they pay for. There is no cap on the amount you could spend on care, it only stops if your asset value falls the lower threshold as a result.

Burnham has previously supported replacing or reforming the current inheritance tax system with a dedicated care levy, reportedly around 10% of an individual’s estate, to help fund social care on a similar basis to the NHS. The objective is to create a system where care is available according to need rather than a person’s ability to pay.

What is the thinking behind introducing a care levy?

His argument is based on a problem many families have experienced first-hand. Under the current means-tested system, those with significant assets can find themselves meeting substantial care costs, while others receive greater support from local authorities. Critics argue this creates an unfair lottery where some families preserve much of their estate while others see years of savings and property wealth depleted by care fees.

What are his opponents saying about the proposal?

However, the proposal raises important questions. Today, inheritance tax affects only a relatively small proportion of estates due to the availability of nil-rate bands and residence nil-rate bands. A universal care levy could potentially bring many more estates into scope, including those that currently have no inheritance tax liability. This has led opponents to describe the concept as a “death tax”, arguing that it would penalise families who have spent decades building up savings and property wealth.

The broad, current debate about the wealth tax system

From a financial planning perspective, the debate reflects a much broader trend. Policymakers, academics and think tanks have increasingly questioned whether wealth is taxed as effectively as earnings. The Institute for Fiscal Studies has highlighted the growing importance of inherited wealth and suggested that the current inheritance tax system contains numerous complexities, reliefs and distortions that warrant reform.

Is the Dilnot Approach a Better Alternative?

The debate over social care funding is not new. More than a decade ago, the Dilnot Commission was established to consider how England could create a fairer and more sustainable system. Its central recommendation was not to make care entirely free, but rather to place a lifetime cap on the amount any individual would be required to contribute towards their eligible care costs. Once that cap was reached, the state would take over responsibility for funding future care costs.

The attraction of the Dilnot model was that it sought to strike a balance between personal responsibility and state support. Individuals would still be expected to contribute towards the cost of their care, but they would be protected from catastrophic expenses that could otherwise consume a substantial proportion of their estate. This would have made it easier for families to plan and would have reduced the fear of having to sell a family home to meet escalating care costs.

Successive governments have supported aspects of the Dilnot recommendations in principle, but implementation has been repeatedly delayed due to concerns about affordability and competing pressures on public finances. As a result, many of the underlying problems identified by the Commission remain unresolved today.

How does the Dilnot approach differ from Mr Burnham’s proposal?

Andy Burnham’s vision for a National Care Service takes a fundamentally different approach. Rather than capping individual exposure, it seeks to spread the cost across society through a universal levy on estates, allowing care to be provided on a similar basis to the NHS. Supporters argue this is fairer because everyone contributes according to their accumulated wealth. Critics, however, contend that the Dilnot model better preserves incentives to save and avoids extending taxation to estates that would not currently be subject to inheritance tax.

Is a hybrid approach the future of care funding?

In reality, the future of care funding may lie somewhere between the two models. A combination of a care-cost cap, greater state support and targeted taxation could ultimately prove more politically acceptable than either a wholly state-funded system or the current means-tested approach. The challenge for policymakers remains the same as it was when Sir Andrew Dilnot first reported: how to share the cost of an ageing population fairly between individuals, families and the state.

What does this mean for you?

For financial planners and clients alike, the key lesson is that social care funding remains an area of significant policy uncertainty. Any future reforms—whether based on Burnham’s proposals, Dilnot’s recommendations or a hybrid of the two—could have important implications for estate planning, inheritance tax mitigation and long-term financial security.

At present, no changes have been enacted and clients should avoid making planning decisions based on speculation alone. Nevertheless, the discussion serves as a useful reminder that tax policy evolves over time. Individuals with significant estates, investment portfolios, trusts or pension wealth should ensure their plans remain flexible enough to adapt to future legislative changes.

Whatever your view of the proposal, the debate highlights a challenge successive governments have struggled to solve:

How to provide fair, sustainable social care for an ageing population without placing an excessive burden on future generations. The answer is unlikely to disappear from the political agenda any time soon.

If you’d like to discuss your long-term plans, our financial planning team is here to help. Get in touch: info@kirkrice.co.uk