The Labour Party’s recent inheritance tax proposal, which targets military personnel’s death-in-service benefits, has drawn a lot of criticism. Former Chancellor Kwasi Kwarteng is among the critics who have characterized the legislation as detrimental to bereaved families and providing insignificant financial advantages to the Treasury.
The proposed policy would tax payments made to the families of departed members of the armed forces, and it would go into effect in April 2027. Opponents contend that the reforms would unjustly punish individuals who serve the country and their loved ones, undermining confidence between the government and the military, even though several exemptions are still in place.
Inheritance Tax Changes to Include Death-In-Service Payments
The Labour Party’s plan aims to extend inheritance tax to death-in-service payments for Armed Forces personnel, affecting families of those who pass away “off duty.” Under the new rules, unmarried partners and children of the deceased would face up to a 40% tax on payments, typically amounting to four times the individual’s salary. Payments to spouses or civil partners would remain exempt, as would deaths attributed to “on duty” service-related injuries, accidents, or illnesses.
Supporters of the policy argue that the reforms ensure consistency in tax laws. However, critics highlight the potential strain on grieving families. Former Chancellor Kwasi Kwarteng labelled the proposal “total insanity,” contending that the financial benefit to the Treasury would be negligible compared to the emotional and social costs. “The fiscal benefit you get from that is tiny compared to the impact, the moral impact, the impact on people’s well-being,” he told GB News.
Widespread Criticism of Fairness and Impact on Military Morale
Opposition to the policy has intensified among military advocates. Major General Neil Marshall, chief executive of the Forces Pension Society, cautioned that the measure could have a “corrosive” effect on the relationship between Armed Forces personnel and the government. He expressed concern over the potential for the policy to undermine trust in leadership, especially given the sacrifices military families endure.
While Kwarteng criticized the policy’s lack of consideration for its human impact, he also suggested it was a result of bureaucratic oversight. “They’ve done this because it makes the system fairer, but of course they haven’t looked at the human impact,” he said in his remarks.
In defense, the Treasury emphasized that the proposal preserves current exemptions for active-duty deaths. A spokesperson stated, “We value the immense sacrifice made by our brave Armed Forces, which is why existing inheritance tax exemptions will continue to apply.”
As debates continue, the proposed inheritance tax changes highlight the challenges of balancing fiscal policy with social responsibility, raising critical questions about how the government supports its Armed Forces and their families in times of loss.
