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When someone dies, Inheritance Tax must normally be paid on their estate (everything they owned at the time of death), if their estate is worth more that a certain amount (currently £325,000). The main exemption is if they leave their total estate to their spouse.
However, if a serving, or former, member of the Armed Forces dies from (or death can be shown to have been hastened by) an injury sustained or disease contracted on active service against the enemy or other service of a warlike nature (such as operations against hostile forces in peace time or anti-terrorist operations), a complete exemption from inheritance tax can be granted on their estate under the provisions of s154 of the Inheritance Tax Act (Note: The armed forces exemption does not apply to any inheritance tax liability that may be due in respect of gifts made within 7 years of death).
Whilst the total exemption is not transferrable to a spouse’s estate, the granting of an exemption on a veteran’s estate will double the personal tax threshold (to £650,000) used to assess any Inheritance Tax liability on the spouses estate when they die.
Each application for an exemption under s154 is considered on its merits, after the death of the veteran concerned and requires the MoD to be given access to the veteran’s full medical records. Neither war time service in the armed forces, or receipt of a war pension, is a guarantee exemption will be granted.
Anyone wishing to apply for an exemption under s154, on a veteran's estate, should contact
Service Personnel and Veterans Agency.
Joint Casualty & Compassionate Centre (Deceased Estates)
Gloucester GL3 1HW
Telephone 01452 712612 Ext 8174
or Email: email@example.com