In news that will be welcomed by many, the families of front-line workers are to be exempt from Inheritance Tax (IHT) should they pass away as a result of COVID-19, in what the government calls the ‘blue light exemption’.
What is the ‘blue light exemption’?
Originally drafted in by parliament to attract more retired doctors and emergency service workers back to the front-line, the list of personnel eligible for the ‘blue light exemption’ has recently been extended to recognise the services of more key workers during the pandemic.
This extension will now provide employees of publicly funded care homes, home care workers, and charity workers affected by the virus with security in these difficult times.
The tax relief can apply to a person’s estate, including their:
• Property or business
• Possessions and cash
• Gifts and trusts to children and grandchildren
• Pay-outs from life insurance policies
• Jointly held assets, such as joint property
A brief history of IHT reliefs and exemptions
In 1796 a tax on British people’s estates was introduced by the government to help fund the Napoleonic Wars, which lasted until 1815.
Despite the value IHT brings to UK plc, the Napoleonic Wars saw IHT relief or exemptions introduced by parliament to recognise the gallantry of soldiers killed in the line of duty.
These exemptions were extended again during the Second World War. As well as those who were killed in action, those who passed away from disease or injury were also automatically granted full IHT relief.
More recently, in 2015, this inheritance tax exemption was extended to include emergency services personnel such as doctors and nurses, paramedics, ambulance staff. Now, in 2020, all key workers, or ‘blue light’ workers, are the latest notable additions.
Although it is not yet clear how far the ‘blue light exemption’ will go, it is hopeful the government will apply these exemptions to other paid or voluntary workers who have provided essential medical support to seriously ill people and their families who have fallen victim to COVID-19.
However, it is clear over 200 years later, IHT continues to impact people from all walks of life.
The government collected £5.4 billion in IHT receipts during 2018-19, an increase of 3% (£166 million) on the previous tax year. These receipts are only expected to climb further still as the average inheritance is set to reach £91,000 by 2027.
If you believe that you or your family are likely to be affected by Inheritance Tax, drop us a line to see how we can help.