Rachel Reeves' has changed the current tax-free death in service payments (Image: Getty)

       Rachel Reeves has changed the current tax-free death in service payments - the money given to families of deceased Armed Forces members - and imposed a cut of up to 40%.

       From April 2027, grieving families of military workers will be hit with inheritance tax after Labour MPs voted in favour of the raid.

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       Children or partners of servicemen and women who are not married will have to pay death duties on the lump sum of money.

       The ‘death tax’ stands at a rate of 40% on an estate above the nil-rate band of ￡325,000. A new army recruit earns a minimum of ￡25,200 from day one of basic training which calculates to a potential death in service payment of ￡100,800, according to Telegraph analysis.

       This means an inheritance tax bill of ￡40,320 if their nil-rate band has been used. For Royal Navy captains earning a typical salary of ￡110,500, family members could face a ￡176,800 charge.

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       Labour MPs voted in favour of the raid on grieving families of war heroes (Image: Getty)

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       Death in service payments are typically a one-off figure issued to named beneficiaries of a military worker who dies while on duty. The amount stands at the equivalent of four-times the late individual’s salary.

       However, due to changes outlined in Rachel Reeves’ Budget last year, military personnel who die while off duty, due to a reason such as an accident or illness, will be hit with the new inheritance tax rules.

       Ministry of Defence figures reveal there were 2,922 regular Armed Forces personnel and on-duty reservist deaths between January 1, 2000 and August 31, 2023. However, there is no data for off-duty deaths.

       Chief operating officer of the Forces Pension Society (FPS), Matthew Lowe, believes “up to a hundred” families could be affected yearly by the rule change.

       The changes will take effect from April 2027 (Image: Getty)

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       "The Government had made a mistake. We don’t believe this is malicious. But service personnel whose deaths are not attributable to on-duty activities or who die off-duty are being disadvantaged compared to their civilian counterparts, whose death benefits would have been put in trust,” he told The Telegraph.

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       A Treasury spokesman said: “We value the immense sacrifice made by our brave Armed Forces, which is why existing inheritance tax exemptions will continue to apply, meaning that if a member of the Armed Forces dies from a wound inflicted, accident occurring or disease contracted on active service, they will be exempt," reports the Telegraph.

       They added: “Estates of service personnel will also still be able to pass on up to ￡1m with no inheritance tax liability under existing nil-rate bands, reliefs, and exemptions available, which means an estate.”

       Express.co.uk has approached the Treasury for comment.