Question to the HM Treasury:

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.

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.