A 100% relief from inheritance tax which was previously available to members of the Armed Forces and was more recently extended to “blue light” workers in 2015 has now been made available to emergency services workers in the NHS who die from coronavirus in the line of duty. However, a lack of awareness of this little-known new inheritance tax relief for NHS workers may mean that executors who wind up a deceased person’s estate without professional help could fail to make a claim, and so their family could miss out.
The relief is likely to be of most benefit for the more senior members of NHS staff, such as high-earning senior doctors, and it will probably apply to some of the large number of older, frontline workers who have kindly returned to the NHS following their retirement to help in the fight against coronavirus.
It is important to be aware that if a frontline worker has died from coronavirus in the course of duty, their estate will be 100% exempt from inheritance tax. It is essential that the cause of death is correctly recorded on their death certificate as ‘coronavirus’, so that their surviving family can make the claim. The claim must be made manually on the inheritance tax return by their executors, although there is no deadline for making a claim and claims can even be made retrospectively after the inheritance tax has been paid. In that situation, a tax refund will be made by HMRC. This relatively lenient treatment is intended to reflect the spirit of the relief, which offers some small compensation to families who tragically lose a loved one in the course of duty, in the fight against coronavirus.
Making this relief available to NHS workers was suggested to the government by a member of the public, and his suggestion was very promptly adopted. Many would say it is the least we can do for NHS workers who put their lives on the line during this time. My concern would be that, although the relief sounds generous, it may not be very widely applicable at all, for various reasons. This is firstly because there are many NHS workers on relatively modest salaries who will probably not have assets which will exceed the inheritance tax threshold of £325,000 per person on death. Assets below that level are not chargeable to inheritance tax anyway, so those workers will not benefit. Secondly, in many cases the person who dies is likely to be the first to die of a married couple, and in that case again there would be unlikely to be any inheritance tax payable on the estate in any event. This is because typically each of a married couple will leave everything to the surviving spouse on the first death, and transfers between spouses are completely exempt from inheritance tax anyway, so it is often only on the second death when the inheritance tax liability kicks in. Nonetheless, there will no doubt be a number of people to whom the new tax relief will apply, and it is a small thing which will hopefully make their lives a little easier.
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