Labour has ditched plans to hit the grieving children of military personnel with a tax on their bereavement payments.
In October Rachel Reeves announced plans to make relatives in receipt of off-duty death-in-service payments, other than spouses or civil partners, pay inheritance tax from April 2027.
This means children and unmarried partners of soldiers who died from illness while off-duty, would have been subject to a tax on their payments.
But the Chancellor was forced to back down from her Budget announcement after mounting pressure from members of the Armed Forces, who called it a ‘corrosive’ plan.
The Government confirmed to The Daily Telegraph that after a consultation with Armed Forces organisations it had decided to withdraw the proposals.
A spokesman said: ‘From April 6, 2027 all death in service benefits payable from registered pension schemes will be out of scope of Inheritance Tax, regardless of whether the scheme is discretionary or non-discretionary.’
Labour has ditched plans to hit the grieving children of military personnel with a tax on their bereavement payments
Rachel Reeves was forced to back down from her Budget announcement after mounting pressure from members of the Armed Forces, who called it a ‘corrosive’ plan
The latest climbdown comes after Ms Reeves was forced to scale down plans to scrap the universal winter fuel payment and reforms to the welfare system.
Mark Francois, the Tory Armed Forces spokesman, said he welcomes the reversal decision ‘though it represents another U-turn by this Labour Government’.
He added: ‘I am pleased that common sense has now finally prevailed.’
An HM Treasury spokesman said: ‘It’s right that we are excluding all death in service benefits from inheritance tax while still achieving the Government’s objective of removing inconsistencies between pension schemes.’
