Grieving families of war heroes face £180k death duty bills

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Grieving families of war heroes face £180k death duty bills

Grieving families of war heroes face

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of up to £180,000 under Labour, analysis shows.

Death in service payments – lump sums given to the families of deceased Armed Forces members – are currently tax-free.

But

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last year mean payments for off-duty deaths in service will be subject to inheritance tax for the first time, if it is not going to a spouse or civil partner.

Children or partners of

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will have to pay death duties on the benefit April 2027 as a result of the policy.

Death in service payments are usually a lump sum paid to named beneficiaries of a worker who dies while on the company payroll. It is typically the equivalent of four-times the late individual’s salary.

Inheritance tax is levied at a

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, which is currently set at £325,000.

A new recruit in the regular army earns at least £25,200 from day one of basic training, meaning a potential death in service payment of £100,800.

This would result in an inheritance tax bill of £40,320 if their nil-rate band has already been used up.

The family of a Royal Navy captain on a typical minimum salary £110,500 could face a death duty bill of up to £176,800.

Relatives of deceased police officers also face losing as much as 40pc of the money they receive. The family of a Metropolitan Police sergeant on the lowest pay rung of £51,408 would face a tax charge of £82,253 on a death in service payment of £205,632.

For members of the Armed Forces, death in service payments are paid whether or not the individual was “on duty” at the time of their death. Those who die “on duty” will continue to benefit from a separate tax-free arrangement on their death in service payments from 2027.

The Government ‘has made a mistake’

But a military worker who dies while technically “off duty”, such as by sudden illness or accident, will be stung by the new inheritance tax rules.

Ministry of Defence (MOD) figures show that there were 2,922 regular Armed Forces personnel and on-duty reservist deaths between January 1 2000 and August 31 2023. The MOD does not publish data on off-duty deaths.

Matthew Lowe, chief operating officer of the Forces Pension Society (FPS), told The Telegraph he believed “up to a hundred” families of army personnel were likely to be affected by the rule change every year.

He added: “The Government had made a mistake. We don’t believe this is malicious. But service personnel whose deaths are not attributable to on-duty activities or who die off-duty are being disadvantaged compared to their civilian counterparts, whose death benefits would have been put in trust.”

Maj Gen Neil Marshall, the chief executive of the FPS, has written to HM Revenue and Customs (HMRC) urging the Government to reverse the decision. He said the threat of a tax bill would be “corrosive” to the

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.

Alicia Kearns MP, shadow minister for foreign affairs, said: “It is disgraceful that Labour is going to subject the grieving families of military personnel with such an extreme tax bill.

“This is an outright betrayal of members of our Armed Forces, who sacrifice everything they have – including their lives – to keep this country safe and their loved ones who support them to serve.”

The Treasury was approached for comment.

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