Inheritance Tax and life insurance

Inheritance Tax is payable on your estate when you die. You can leave up to £325,000 behind tax free, but anything above this amount will be taxed at 40%.

Value Your Estate

MoneyHub can help you assess the value of your estate, by allowing you to track all of your assets in one place. If you’d like some help assessing how much your estate would be worth if you pass away, speak to a financial adviser.

For more information, read our guide to Inheritance Tax.

Mitigating Inheritance Tax: writing your life insurance policy into trust

There are various ways you can legally reduce the impact of Inheritance Tax on your estate. A life insurance payout will counted as a part of your estate for the purposes of calculating Inheritance Tax due, unless you write the policy into trust before you die.

Most life insurance providers offer you the option to write into trust for free when you take out a life insurance policy. If so, and if you’re confident that you understand the legal terms, you can choose to do it yourself. Alternatively you can seek advice from a financial adviser.

Next steps

You should consider taking independent financial advice when taking steps to reduce your IHT bill.

If you've decided that a life insurance policy is right for you, you can compare life insurance quotes here.

Last updated: 02 June 2015