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Guides to UK rules: ISAs and pensions, HMRC allowances, National Insurance, and FCA-regulated insurance and protection.
20 guides
Covered here: ISA · SIPP · National Insurance · HMRC · FCA · figures in GBP
Three taxes could in principle reach a UK life insurance payout, and for an ordinary protection policy two of them usually reach nothing. The one that does is inheritance tax, and it arrives by a route most people do not expect.
HMRC tells agents plainly not to count the residence nil-rate band when working out whether an estate is excepted. Families who count it anyway conclude no form is needed, and forfeit the very allowance they were relying on.
The cap on 100% agricultural and business property relief took effect on 6 April 2026. The figure most coverage still quotes was superseded four months earlier, and the rule that it could not pass to a spouse was reversed with it.
A deed of variation lets the people who inherit redirect what they were left, and section 142 treats the redirection for inheritance tax as though the deceased had written it that way. The window is two years and it does not extend.
The reduced inheritance tax rate is not a gesture: it is arithmetic with a cliff edge. Give just under the 10% threshold and your beneficiaries are worse off than if you had given nothing at all.
It is the most common inheritance tax plan in Britain and one of the few that fails completely. A gift you continue to benefit from is a gift with reservation, and surviving seven years does not rescue it.
Everyone knows about the £3,000 a year. Almost nobody uses the exemption sitting next to it, which has no ceiling at all and no seven-year wait, provided the money comes from income and you can still afford your life.
The rise from 66 to 67 runs between April 2026 and April 2028. It is phased by date of birth in months, not switched on for everyone at once, so two people born weeks apart can have different State Pension ages.
The payment goes out automatically in November or December. Above £35,000 of taxable income it is recovered through PAYE or Self Assessment, with no form to fill in, and your partner's income does not count towards your total.
From 6 April 2027 the cash ISA subscription limit falls to £12,000 for under-65s while the overall ISA allowance stays at £20,000. Parking the difference as cash inside a stocks and shares ISA is exactly what the anti-circumvention rules were written to stop.
From 6 April 2029 only the first £2,000 sacrificed into a pension each year escapes National Insurance. HMRC expects 3.3 million employees to be affected, at an average of £84 in the first year, and Income Tax relief is untouched.
From April 2026 the full new State Pension is £241.30 a week: £12,547.60 a year against a Personal Allowance frozen at £12,570 until 2031. One more triple-lock rise and the State Pension alone exceeds it.
One pays a monthly income for as long as you cannot work. The other pays a lump sum on diagnosis of a listed condition, once, and then ends. You can be seriously ill and claim on one while the other pays nothing.
Statutory Sick Pay is £123.25 a week for up to 28 weeks. After that it is Employment and Support Allowance, at £145.90 a week at the very most. Those two numbers are the floor everything else is measured against.
Most unused pension funds come within inheritance tax for deaths on or after 6 April 2027. Personal representatives carry the liability, beneficiaries can have half the money withheld for up to 15 months, and death in service is excluded.
Almost everyone believes a gift made five years before death is 60% exempt. It is not. Taper relief reduces the tax, not the gift, and on most gifts there is no tax to reduce.
The insurer hands you two trust forms and no way to choose between them. A bare trust fixes the beneficiaries permanently; a discretionary trust lets trustees decide later. For a term policy, the tax charges people fear rarely apply to either.
A UK life insurance payout that is not written in trust generally lands in your estate, where it can be taxed at 40% and has to wait for probate. Putting the policy in trust is usually free, usually done at application, and routinely skipped.
The residence nil-rate band adds up to £175,000 to what you can pass on tax-free, but only if you leave a home you once lived in to a direct descendant. Estates over £2 million lose it £1 for every £2.
Intestacy rules are fixed, public and indifferent to what you intended. A surviving spouse takes the first £322,000 and half of what is left; an unmarried partner takes nothing at all. Here is how a life insurance payout gets caught by those rules, and how it avoids them.