Armed Forces: Inheritance Tax
The question
To ask the Chancellor of the Exchequer, what discussions she has had with the Secretary of State for Defence on the potential impact of changes to the taxation rules on death-in-service benefits on service families.
Answered by James Murray
There is a long-standing 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 in certain circumstances. There is also an exemption for service personnel if they die as a result of being deliberately targeted because of their job. More information is available at www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm11301 and www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm11311.
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 with no inheritance tax liability 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. The Government will bring most unused pension funds and death benefits payable from a pension into a person’s estate for inheritance tax purposes from 6 April 2027. Inheritance tax is already applied to death in service benefits for some pension schemes.
Verbatim has judged this answer against the question that was actually asked — answered, partly answered, or evaded. Sign in to see the verdict →