Category: Taxation

Part two of a three-part series on UK tax law and life insurance. Part one established the baseline: death benefits are exempt from Income Tax and CGT, but a policy not held in trust falls into the deceased’s estate and is potentially subject to Inheritance Tax at 40%. This piece examines the structural solution — how trusts work, which structures are available, and what the April 2025 legislative changes mean in practice. THIS SERIESPart 1 – Are Life Insurance Payouts Tax-Free in the UK?Part 2 – Writing Life Insurance in Trust (You are here)Part 3 – Offshore PPLI and the Trust Question: What UK Policyholders Need to Know Beyond the Crown Dependencies THE FUNDAMENTAL MECHANISM A trust is a legal

The question sounds simple. The answer is not. Life insurance death benefits are widely – and correctly – described as tax-free. But that description applies to only two of the three taxes that could theoretically touch a payout. The third, Inheritance Tax, is where the planning gap opens. And for high-net-worth policyholders with estates above the nil-rate band threshold, closing that gap is not optional. This is the first in a three-part series examining how UK tax law interacts with life insurance – including how trust structures, and specifically the trust arrangements offered by offshore PPLI carriers, determine whether a death benefit reaches its intended beneficiaries intact. For a broader overview of how PPLI structures serve estate planning and tax