As someone who has already taken the important step of arranging life insurance, you’ve made sure your loved ones are looked after and protected financially. That’s a big achievement - it gives peace of mind knowing you’ve planned for the unexpected.

The Autumn Budget 2025 is set for 26 November. While Chancellor Rachel Reeves has pledged not to increase income tax, National Insurance, or VAT, she has indicated that 'hard choices' may be necessary. As a result, inheritance tax (IHT) is expected to come under closer scrutiny, potentially leading to higher bills for ordinary families.

Why Families Could Be Affected
Rising house prices, frozen IHT thresholds, and changes to pensions mean that more estates are moving into the 40% tax bracket. Some of the changes being discussed include:

Pensions pulled into estates from 2027
Most unused pensions will count for IHT purposes. Families could face both IHT and income tax on inherited pensions if you die aged 75 or over.

Example: David, aged 72, with a £250,000 pension and £300,000 in other assets:

• Now: Only the £300,000 in assets counts for IHT → bill ~£0 (falls within allowances)
• From 2027: The full £550,000 counts toward the estate which means the amount above the IHT threshold (~£225,000) is subject to 40% tax → IHT bill ~£90,000

Age rules for income tax on pensions

• Under 75: Normally, no income tax is due on inherited pensions.
• 75 or over: Any inherited pension is taxed at the beneficiary’s marginal rate (20%, 40%, or 45%).

Possible lifetime cap on gifts
Currently, gifts you make during your lifetime are exempt from IHT if you survive seven years after giving them. The government may limit this to £50,000–£100,000, reducing one of the key ways families can pass on wealth.

How Your Life Insurance Can Protect Your Family
Even with life insurance in place, it only sits outside your estate (and avoids IHT itself) if it’s written in trust*. Without a trust, the pay-out could be delayed by probate and may even be treated as part of your estate for inheritance tax purposes.

A policy in trust ensures your family receives the money quickly - exactly when it’s needed to cover tax bills, debts, or everyday living costs.

Quick Benefits of Putting Your Policy in Trust

✅ Immediate access to funds – no delays from probate
✅ Outside your estate – avoids increasing IHT exposure
✅ Peace of mind – your loved ones can focus on coping, not cash flow

Take Action Now
With inheritance tax rules tightening, pensions being pulled into estates, and gifts potentially capped, taking the simple step of putting your life insurance in trust is more important than ever.

👉 Contact us now on 0800 612 8005 to discuss placing your policy into trust, and read our trust guide here.

Or request a call-back from our Customer Care Team 👉 here

*Trusts are not regulated by the Financial Conduct Authority
This article is provided for general information purposes only and does not constitute legal, tax, or financial advice. Tax rules and legislation may change, and their impact will depend on your individual circumstances. Before taking any action, you should seek professional advice from a qualified adviser to ensure your arrangements are appropriate for your situation.