The new bereavement support payment (BSP) will be be tax-free with a higher immediate payment, the draft Finance Bill clauses released by parliament have revealed.
The BSP will replace the widowed parent's allowance from 2016, and will also involve an increase in the in the immediate payment of £3,000 to £5,000 upon the death of a spouse or civil partner where the couple have dependent children.
The payment will then be followed by a £400 monthly payment to the surviving parent, for a period of one year after the death of a parent.
The current arrangements include a payment of £111.20 a week until the youngest child leaves full-time education and £2,000 paid at the time of the death.
Robin Williamson, Technical Director of the Low Incomes Tax Reform Group, said: "It is of considerable concern to LITRG that the new bereavement support payment will be markedly less generous in the longer term than the present arrangement, particularly to families with young children. From that perspective, the fact that the payment will be tax-free in its entirety is at least something to be welcomed."
