Armed Forces: Inheritance Tax
The question
To ask the Chancellor of the Exchequer, with reference to the consultation entitled Technical consultation - Inheritance Tax on pensions: liability, reporting and payment, published on 30 October 2024, if she will make an estimate of how much tax revenue will be raised following the extension of inheritance tax on death-in-service payments for military families in each of the next five years.
Answered by James Murray
The costing for including inheritable pension wealth in the value of the estate for inheritance tax purposes from April 2027 was certified by the OBR at the 2024 Autumn Budget as ‘reasonable and central’. Additional information on the costing methodology can be found in the OBR’s Economic and fiscal outlook – CP 1169.
The specific revenue raised as part of this costing from the extension of inheritance tax to death-in-service payments for military families in each of the next five years is not available as the data does not distinguish whether a taxpayer is or was a member of the Armed Forces.
Estates of service personnel will benefit from the normal nil-rate bands, reliefs, and exemptions available. For example, the nil-rate bands mean an estate can pass on up to £1 million and the general rules mean any transfers, including the payment of death benefits, to a spouse or civil partner are exempt fully from inheritance tax. There is also a full exemption from inheritance tax when a member of the armed forces dies from a wound inflicted, accident occurring, or disease contracted on active service.
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