{"id":260706,"date":"2025-07-13T04:44:08","date_gmt":"2025-07-13T04:44:08","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/260706\/"},"modified":"2025-07-13T04:44:08","modified_gmt":"2025-07-13T04:44:08","slug":"wealthy-turn-to-life-insurance-to-soften-blow-of-new-uk-inheritance-tax-rules","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/260706\/","title":{"rendered":"Wealthy turn to life insurance to soften blow of new UK inheritance tax rules"},"content":{"rendered":"

Unlock the Editor\u2019s Digest for free<\/p>\n

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/p>\n

The rich in Britain are turning to life insurance to reduce the pain of unexpected inheritance tax bills following a contentious overhaul of the system in the autumn Budget.<\/p>\n

\u201cEvery market has its day in the sun. Life insurance is having a moment,\u201d said Holly Hill, associate director at insurance broker John Lamb Hill Oldridge, adding that she had seen \u201ca deluge\u201d of new policies taken out by estate owners following the Budget in October last year.<\/p>\n

John Lamb Hill Oldridge said it had previously been writing new life insurance policies for 30 rich individual clients at any one time, but since the tax reforms were announced, the number had gone up to 110.<\/p>\n

In Rachel Reeves\u2019 first Budget<\/a> as chancellor, she announced reforms to agricultural property relief (APR) and business property relief (BPR). As a result of the changes, people with large estates or companies that had previously been exempt will pay inheritance tax at 20 per cent on assets above \u00a31mn from April 2026.<\/p>\n

Reeves also confirmed the abolition of the non-dom regime, which allowed British residents who declared their permanent home as being overseas to avoid paying UK tax<\/a> on foreign income and gains.<\/p>\n

There is no figure for how many rich individuals have taken out life insurance cover and how much they have insured against. But Hill said her company had policies covering \u00a33.5bn, which represented inheritance tax on assets of \u00a38.75bn.<\/p>\n

People are taking out both fixed-term policies, which cover them for a set period of their life, and whole-of-life cover, advisers said. <\/p>\n

Life insurance policies are held in trust and can be an effective way of settling the IHT bill of an estate. Both types of policy pay out in the event of death, ensuring heirs are not forced to sell assets quickly to pay the UK tax authority within six months of death.<\/p>\n

Hill said that former non-dom clients who had moved overseas but kept their UK property had thought: \u201cI might as well just slap an insurance policy on my house in Kensington\u2009.\u2009.\u2009.\u2009and then I can just be free abroad and not worry,\u201d about their heirs struggling to pay a future IHT bill, as this would be covered by their policy.<\/p>\n

David Gregory, a senior partner at 1291 Group, an insurance advisory business for wealthy families, said there had been \u201ca massive increase in demand\u201d to meet new tax liabilities.<\/p>\n

There had been indications of fresh demand from early 2024, when then-chancellor Jeremy Hunt announced he wanted to abolish the non-dom regime, which gave people protection from IHT on non-UK assets.<\/p>\n

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Catrin Harrison, a partner at law firm Charles Russell Speechlys, said: \u201cPreviously, we didn\u2019t work with the insurance industry a great deal; we could structure pretty good protection, but now we have individuals who thought their non-UK wealth was protected and it\u2019s suddenly not.\u201d<\/p>\n

Harrison said life insurance \u201ccan be surprisingly good value\u201d. <\/p>\n

If a non-dom had been paying the \u00a390,000 annual fee to use the tax-favourable \u201cremittance basis\u201d under the previous regime, they could now be spending it on inheritance-tax protection instead, she said.<\/p>\n

Those who have decided to remain in the UK will see their worldwide assets potentially subjected to the standard rate of inheritance tax at 40 per cent.<\/p>\n

The Treasury forecast that ending the non-dom system would bring in \u00a312.7bn by the 2029-30 tax year, while the change to APR and BPR would raise \u00a31.8bn.<\/p>\n","protected":false},"excerpt":{"rendered":"Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this…\n","protected":false},"author":2,"featured_media":260707,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5018,3,4],"tags":[748,393,4884,1144,712,16,15,1764],"class_list":{"0":"post-260706","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-britain","8":"category-uk","9":"category-united-kingdom","10":"tag-britain","11":"tag-england","12":"tag-great-britain","13":"tag-northern-ireland","14":"tag-scotland","15":"tag-uk","16":"tag-united-kingdom","17":"tag-wales"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114844104582405582","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/260706","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=260706"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/260706\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/260707"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=260706"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=260706"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=260706"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}