Thousands could be overpaying inheritance tax on life insurance
A simple oversight, not writing cover into trust, may have cost families £340m in inheritance tax in a single year, experts warn.
New HMRC figures show around £850m in life insurance policies across 7,020 estates were counted as part of death duty liabilities in 2023-24, according to analysis reported by The Telegraph. Experts say much of this could have been avoided entirely if the policies had been written in trust.
Sean McCann of NFU Mutual says many people buy life insurance without advice and do not realise that, left outside a trust, a payout is treated as part of their estate and can be taxed at 40%. On these figures, the 7,020 families affected may have paid around £340m in inheritance tax needlessly, an average of about £48,000 each.
Writing a policy into trust usually just means filling in a form the insurer provides free of charge, but advisers stress it is normally a one-way decision: once in trust, it is difficult or impossible to unwind, so it is worth getting advice on the right structure first. Ian Dyall of wealth manager Evelyn says single-life and joint second-death policies are generally best held in trust, though joint first-death policies, designed to support a surviving spouse, usually should not be.
Based on reporting by The Telegraph (1 August 2026). Information only, not advice.
Information only. This is general information, not financial, tax or legal advice, and not a personal recommendation. Tax rules depend on your individual circumstances and can change. Please speak to a qualified, FCA-regulated adviser or a solicitor before acting.