Simple steps to keep your money in your family's hands
See if your payout could be taxed How to find an adviserNo forms. No products. Nothing to buy. Just information.
Answer two quick questions to see whether your payout could be caught by inheritance tax, and how much writing it in trust could save your family.
Estimate only, based on the standard £325,000 tax-free allowance (the "nil-rate band"). It assumes you are leaving your estate to family other than a husband, wife or civil partner (gifts to them are usually tax-free), and it does not include the extra home allowance or other reliefs. This is general information, not advice.
A life insurance payout is usually free of income tax and capital gains tax, and a few simple steps when you take out a policy can help keep it that way, out of reach of a 40% inheritance tax charge. Here's what to do.
Writing the policy in trust keeps the payout out of your estate, so anything above the £325,000 nil-rate band isn't taxed at 40%. Insurers usually set up a trust at no cost, so ask before you buy.
From April 2027, most unused pensions start to count towards inheritance tax, so more estates may face a bill. Ask how that affects the cover you need and how it's held.
Directing the payout to named people (usually through a trust) rather than to "your estate" can keep it out of the inheritance tax calculation and pass money directly, without waiting for probate.
A joint policy pays out to your partner tax-free, but that money then sits in their estate and can be taxed at 40% on the second death. Two single-life policies, each in trust, can avoid it.
If you're a company director, a Relevant Life policy can be paid by the company, is usually a tax-deductible expense, and sits outside your estate, often more tax-efficient than paying from taxed income.
Plain-English updates on UK life insurance, trusts and inheritance tax. New articles added regularly.
8 September 2026
A growing number of retirees are using a combination of annuities and life insurance held in trust to convert pension savings into tax-protected family wealth as the April 2027 inheritance tax deadline approaches. The strategy works by buying a joint life annuity and using guaranteed income to pay premiums on a whole-of-life policy held in trust.
A couple aged 65 with a 1 million pound pension could potentially secure around 2.5 million pounds of cover. However, experts caution that the strategy comes with complexity and requires professional guidance to ensure it complies with tax rules.
Based on reporting by Telegraph Money (8 September 2026). Information only, not advice.
More news
Financial advisers are highlighting a major shift in how UK families should approach inheritance planning as unused pension savings become subject to inheritance tax from April 2027.
7 September 2026Read more →The Financial Conduct Authority has warned that millions of UK families remain unprotected, with 58 percent of adults holding no life, critical illness or income protection insurance despite high protection needs.
6 September 2026Read more →The UK's largest life and pensions mutual has seen demand for protection policies spike as customers look to shield their families from new inheritance tax rules on unused pensions.
21 August 2026Read more →More guides
From 2027, most unused pensions start to count towards inheritance tax. Here's what that could mean, and why life cover held in trust matters more than before.
Guide Read more →What "in trust" really means, why it can keep a payout out of your estate, and the questions to ask your broker before you buy.
Guide Read more →Why two individual policies can sometimes beat one joint policy when it comes to inheritance tax, and how to weigh them up.
Guide Read more →Trusts, inheritance tax and life insurance depend on your personal circumstances, and the rules can change. We don't give advice or arrange anything, but here's how to find a qualified, independent professional to talk to. It's usually free to have an initial conversation.
Confirm any firm or adviser is authorised and regulated before you deal with them.
register.fca.org.uk →Independent directories let you search for regulated advisers near you and read reviews.
unbiased.co.uk →A qualified solicitor can advise on trusts and estate planning specifically.
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