Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether the application of inheritance tax to death in service payments will apply to (a) fire, (b) police service and (c) any other emergency service payments.

Estates of emergency services 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 fully exempt from inheritance tax. There is also an existing full exemption from inheritance tax when a member of the emergency services dies from an injury sustained, accident occurring, or disease contracted when that person was responding to emergency circumstances. More information is available at www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm11291.

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.

The expected revenue from reforms to the inheritance tax treatment of unused pension funds and death benefits was set out at Autumn Budget 2024. A specific breakdown of the expected revenue from different forms of death benefits is not readily available.