NHS workers killed by Covid are exempt from inheritance tax – but their families were never told

The families of NHS workers who died during the pandemic face wrongly paying inheritance taxes.

Medics who lost their lives to coronavirus are missing out on a little-known exemption due to confusion over complex rules, lawyers fear.

Doctors and nurses who died of Covid-19 after working in hospitals and surgeries during the pandemic are eligible for 100pc relief from inheritance tax on their estate.

In 2015, the government extended an inheritance tax exemption – previously only available to members of the armed forces – to include “blue light workers” who die responding to emergency circumstances.

HM Revenue and Customs confirmed in 2020 the exemption applied to healthcare workers who died while working on the pandemic frontline.

More than 800 doctors, nurses and other healthcare workers died of coronavirus between March 2020 and February 2022, according to the Office for National Statistics. 

David Jones MP, a former cabinet minister, said: “It is essential that the Ministry of Defence and other employers should draw the attention of eligible families to [this exemption].

“HMRC should extend the available period for tax refund claims in the case of service families.

“However, the problem could be overcome completely by abolishing inheritance tax altogether. It is a nasty tax on death and applies largely to assets built up over a lifetime from taxed income.” 

The Telegraph is campaigning for inheritance tax to be scrapped, along with more than 50 MPs.

It is mainly older, senior members of staff who stand to benefit from the exemption, as they have had more time to build their wealth and incur an inheritance tax liability.

Many doctors and nurses who contracted Covid-19 in the line of duty have survived with long-term health conditions which could still play a major role in their death. By the time they pass away, their estate may well fall into the death tax net. It means more could become eligible for the relief as coronavirus continues to take lives years after the global outbreak began.

However, lawyers fear many families could be failing to claim the tax break, due to a lack of awareness it exists.  

Kieran Bowe of the law firm Russell Cooke said: “For someone who has suffered consequences to their health as a result of coronavirus while working in the line of duty, and who later dies because of those consequences, the exemption should still apply.”

However, few people are aware of the relief, Mr Bowe said, and are therefore at risk of overpaying inheritance tax if they fail to make a claim.

He said: “The exemption was at the forefront of our minds in the pandemic but, as life returns to normal, naturally it has fallen under people’s radar.”

There is another obstacle facing those who make a claim years after their loved one contracted the disease: those who qualify do not automatically benefit from the exemption.

Sean McCann of advice firm NFU Mutual said: “The onus is on the family to provide evidence that the death was because of, or hastened by, responding to an emergency. The evidence needed will depend on the length of time between the incident and the death.”

The more time has passed, the harder it will be for the family to prove Covid-19 was the cause of death.

HMRC says: “Where the death occurs some time after the incident, including many years after the incident, the evidence will need to be more substantial to show that the deceased was an emergency responder who was responding to emergency circumstances and that the death was a result of those actions.”

There is no limit on when someone can claim the exemption. However, once the inheritance tax is paid, families have just four years to apply for a refund from HMRC. Any later and their claim will be rejected.

Inheritance tax is charged at 40pc on personal wealth in excess of the £325,000 tax-free allowance, which has not risen since 2009 despite years of inflation and house price growth.

Last year the tax take from death duties soared to a record-breaking £7.1bn, with forecasts suggesting it could rise to £8.4bn a year by 2027-28, due to Chancellor Jeremy Hunt’s freeze on tax thresholds.  

A Government spokesperson said: “More than 93pc of estates aren’t expected to pay any inheritance tax in the coming years – however the tax still raises more than £7 billion a year to help fund public services like the NHS and schools.

“Eligible health workers who died responding to the Covid-19 emergency will not pay inheritance tax.”