Inheritance Tax rules recognise key workers impacted by COVID-19.
There is a little-known exemption from Inheritance Tax (IHT) for emergency services personnel, known as the blue light exemption.
The legislation initially applied when a member or former member of the armed forces died as a result of injuries or disease sustained while on active service. Their whole estate would be exempt from the payment of IHT.
The Finance Act 2015 extended the exemption to cover individuals who work in emergency situations. In particular the exemption applies when an emergency responder dies as a result of:
An injury sustained, accident occurring, or disease contracted at a time when that person was responding to emergency circumstances in that person’s capacity as an emergency responder, or
A disease contracted at some previous time, the death being due, to or hastened by, the aggravation of the disease whilst responding to emergency circumstances in that person’s capacity as an emergency responder.
Emergency responders are identified as being emergency services personnel (for example those employed in providing fire services, medical, ambulance or paramedic services or police, and services for the transportation of organs, blood and medical equipment amongst others). The exemption also applies to those providing humanitarian assistance.
What has changed and who may benefit?
Now, in 2020, all key workers, or ‘blue light’ workers, are the latest notable additions to be included within this exemption.
Therefore, the estate of NHS workers and other emergency services personnel should be exempt from IHT if the deceased’s cause of death is COVID-19.
Not having to pay the IHT will never, ever make up for the loss of a family member, but it is a small acknowledgement of the amazing sacrifice that emergency services personnel are making every single day during the COVID-19 crisis.
Who is Likely to Benefit from the Exemption?
The exemption is likely to benefit older, more senior members of staff as they typically have built up more assets over time. It may also help those recently retired members of staff who have now come back to help in this crisis.
Ultimately it will help anyone who has an estate that would be subject to IHT in the event of their death.
A person’s estate may include:
Property or business
Possessions and cash
Gifts made within the last 7 years and trusts to children and grandchildren
Investments
Pay-outs from life insurance policies
Jointly held assets, such as joint property
Where to get Help and Advice on Inheritance Tax Planning.
To read more about personal finance and your money, you can find more articles over on our news page. Alternatively, if you have specific questions about Inheritance Tax Planning or anything else to do with your money, please get in touch to speak to one of our Chartered Financial Advisers. Don’t forget, this article offers information about financial planning and should not be taken as personal advice.