Soldiers hit with further Labour tax ‘betrayal’ despite personnel shortages

An army widow has labelled plans to add to payments made to the families of deceased service personnel a “betrayal”.

Jilly Carrell, 56, lost her husband Colonel Nick Carrell, 52, the father to her two daughters Scarlett, 19, and Beatrice, 17, in March 2021 to a rapid and aggressive form of brain cancer, whilst still serving.

Under the plans, backed by , death in service (DIS) payments, which see a lump sum paid out to a nominated person of those who die whilst in service, will if the person was not married or in a civil partnership at the time of their death.

Mrs Carrell who now runs an organisation to help bereaved military families said: “The government’s announcement that some bereaved families of military personnel will be hit with inheritance tax from April 2027 means that in real terms, children and partners of unmarried servicemen and women will, from April 2027, have to pay death duties on the benefit, which will now go into probate.

“This is nothing short of a betrayal to all those who have already given so much and this will do nothing to improve the recruitment and retention crisis faced by the armed forces.”

In 2023, 73 service personnel from all three branches of the military died in circumstances not related to their service. Their spouse, civil partner or named dependent would have received a death in service payout of four times the person’s final salary, paid in a lump sum and not subject to inheritance tax.

The policy change results from the wider measures to inheritance tax announced by Reeves in her . But initial estimates suggest that based on current proposals, the Treasury would be set to raise a meagre £2 million from the change.

This week, an amendment to the aimed to create a new role that would protect the interests of service personnel.

This would include the power to protect service personnel from the imposition of inheritance tax in the event of their death. However the amendment was rejected by 331 Labour MPs, including 13 with prior military service.

The move has been condemned by The Forces Pension Society (FPS) who said that it would leave service personnel “disadvantaged” compared to their civilian counterparts.

In a letter seen by the Daily Express, Chief Executive of FPS, Major General Neil Marshall OBE, urged the government to reverse the decision which he believes contravenes the Armed Forces covenant.

He said: “We believe the Government has made an error and would not knowingly implement a policy that runs counter to the Armed Forces Covenant.

“Death in service benefits affect those who die prematurely. While benefits paid to spouses or civil partners will be unaffected by IHT, we understand that under the Government proposals, death in service lump sum payments for service personnel who die in service and are not married or in a civil partnership, would be liable to IHT.

“This would lead to military personnel being disadvantaged compared with their civilian counterparts who are able to place such benefits in trust and therefore outside of the deceased’s estate.”

The move is the latest measure to negatively impact the armed forces at a time when poor retention rates have seen the Army’s size plummet to its lowest level since the mid-eighteenth century.

It comes as serving personnel who rely on VAT exemptions to ensure that their children can access education undisturbed by military postings due to the Chancellor’s tax hike on private education.

The Shadow Defence Secretary expressed his frustration at the latest measure as he called on the ) to lobby the Treasury to cancel the proposals.

He told the Daily Express: “We knew Labour’s tax rises were hitting farmers and businesses – now we know they are hitting the armed forces.

“Their education tax will force up the cost of independent boarding schools, which so many children of service families depend upon. And now we learn that their inheritance tax changes threaten death in service lump sum payments for unmarried service personnel.

“The very idea of sharply increasing the tax on death in service payments to those in forces would surely appal the public, who know how important it is to back our service personnel at this time of heightened threats.

“We know that the Treasury are consulting on the death in service measure, and as I said in the Commons, I sincerely hope that the MOD objected to this tax change and will see that it is cancelled. Those who serve our country deserve no less”.

Former Veteran’s Minister blasted the decision which follows moves to repeal legislation which protects veterans of operations in Northern Ireland from vexatious claims.

He said: “From cancelling the protections I built to protect Northern Ireland Veterans from endless hounding by so-called human rights lawyers; to paying ; to raising school fees for service children, to this. Service Folks deserve better.”

A Labour source told the Express.co.uk that the good resulting from the Armed Forces Commissioner Bill would “far outstrip any negative impact” but refused to be drawn specifically on the introduction of inheritance tax.

A Treasury spokesperson said: “We value the immense sacrifice made by our brave Armed Forces, that 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.

“Any pension funds left to a spouse or civil partner in this scenario will also be exempt.”