Rachel Reeves’ has changed the current tax-free death in service payments (Image: Getty)
has changed the current tax-free – the money given to families of deceased Armed Forces members – and imposed a cut of up to 40%.
From April 2027, grieving families of military workers will be hit with after Labour MPs voted in favour of the raid.
Children or partners of servicemen and women who are not married will have to pay death duties on the lump sum of money.
The ‘death tax’ stands at a rate of 40% on an estate above the nil-rate band of £325,000. A new army recruit earns a minimum of £25,200 from day one of basic training which calculates to a potential death in service payment of £100,800, according to Telegraph analysis.
This means an inheritance tax bill of £40,320 if their nil-rate band has been used. For Royal Navy captains earning a typical salary of £110,500, family members could face a £176,800 charge.
Labour MPs voted in favour of the raid on grieving families of war heroes (Image: Getty)
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Death in service payments are typically a one-off figure issued to named beneficiaries of a military worker who dies while on duty. The amount stands at the equivalent of four-times the late individual’s salary.
However, due to changes outlined in Rachel Reeves’ Budget last year, military personnel who die while off duty, due to a reason such as an accident or illness, will be hit with the new inheritance tax rules.
Ministry of Defence figures reveal there were 2,922 regular Armed Forces personnel and on-duty reservist deaths between January 1, 2000 and August 31, 2023. However, there is no data for off-duty deaths.
Chief operating officer of the Forces Pension Society (FPS), Matthew Lowe, believes “up to a hundred” families could be affected yearly by the rule change.
The changes will take effect from April 2027 (Image: Getty)
: [REPORT] [REVEAL]
“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,” he told The Telegraph.
A Treasury spokesman said: “We value the immense sacrifice made by our brave Armed Forces, which is why existing inheritance tax exemptions will continue to apply, meaning that if a member of the Armed Forces dies from a wound inflicted, accident occurring or disease contracted on active service, they will be exempt,” reports the Telegraph.
They added: “Estates of service personnel will also still be able to pass on up to £1m with no inheritance tax liability under existing nil-rate bands, reliefs, and exemptions available, which means an estate.”
Express.co.uk has approached the Treasury for comment.