20 May, 2020
There has long been a 100% Inheritance tax (IHT) exemption for members of the armed forces who died in active service. In 2015 it was extended to cover "blue light" emergency services personnel responding to emergency situations. The IHT exemption has now been extended to most NHS and many other front-line workers who die as a result of coronavirus in the line of duty.
IHT is generally payable on death at a rate of 40% on estates valued at more than the tax-free amount (Nil Rate Band) currently £325,000. This tax-free amount can increase to £500,000 if the Residence Nil Rate Band is added (if you leave your main residence to your direct descendants). For married couples or civil partners, any unused Nil Rate Band or Residence Nil Rate Band can be used by the survivor on the second death, giving a total maximum tax-free amount of £1million.
Previously the exemption was available to the armed forces and emergency services. However, it now includes NHS staff and frontline workers who die as a result of contracting coronavirus at work. This includes the thousands of retired doctors, nurses and other health care workers who returned to work to help support the NHS.
It could be said that it only really benefits high earning doctors and consultants. However, it is the value of an individual's estate on which IHT is paid; someone's salary is not always indicative of the value of their estate, so other NHS and frontline workers will benefit too. Whether it will be extended to include Carers, who are also risking their lives in the fight against coronavirus supporting and caring for the elderly and vulnerable, remains to be seen.
It is a little-known exemption which has not been widely publicised. It is important that the cause of death is reported correctly on the death certificate. The exemption is not automatic and must be claimed by the deceased's executors. There is no deadline, it can be done retrospectively and any relevant IHT already paid should be refunded.
It is a sad fact that over one hundred NHS staff and other healthcare workers across the UK have died with coronavirus. Thousands more have contracted the disease and have thankfully survived but recovering may only be the start of long-term health issues for some, which may not be apparent initially. As the pandemic continues, this exemption is likely to be relevant for some time to come.
For more information contact Jane Burbidge in our Wills, Probate, Tax & Trusts department via email or phone on 01772 220156. Alternatively send any question through to Forbes Solicitors via our online Contact Form.