How to Beat the Inheritance Tax Squeeze: Protect Your Legacy

Labour's continued freeze of the inheritance tax (IHT) threshold is causing concern among middle-income households.

With the £325,000 nil-rate band unchanged since 2009 and no increases planned, more estates are being drawn into the IHT net.

This "stealth tax," as some call it, is happening while property prices rise and wages stagnate.

More families than ever face a potential 40% tax on estates, on top of income tax, stamp duty, and capital gains.

For many who've worked hard to build a future for their loved ones, this feels like being taxed twice.

In the worst-case scenario, this can force children to sell the family home to cover the bill.

A Growing Concern

Inheritance tax now affects a far greater proportion of families.

If your estate—including your home, savings, and investments—is valued over £325,000, the amount above that could be taxed at 40%.

For example, a £1.5 million estate could face an IHT bill of over £200,000, and this must be paid within six months of death.

Many families don't have that kind of money readily available, which can lead to difficult financial choices.

With ongoing IHT reforms, including changes to pensions and property relief, proactive planning is essential.

Experts predict the proportion of estates paying IHT could rise from the current level of around 1 in 17 towards 1 in 10 by 2030.

Life Insurance in Trust: A Strategic Safeguard

One effective way to help cover a potential inheritance tax bill is with life insurance written in trust.

This approach, increasingly used by many families, offers a tax-free payout that sits outside your estate.

This means the funds can be used to help cover the IHT liability without increasing the amount of tax owed.

It's a practical way to provide your family with the necessary funds, exactly when they need them, avoiding the stress of selling assets or taking on debt.

What should the average person do?

If you're worried about how inheritance tax could affect your family, planning ahead is key. Taking early action opens up more choices and could save you money in the long run.

To find out more and explore potential solutions, a great place to start is LetsGoCover (letsgocover.co.uk). At LetsGoCover, you can quickly and easily compare life insurance quotes that may be tax-efficient.

It's a free service designed to be quick and confidential. With their comparison tool, you can estimate your potential IHT bill, see how much life cover might be right for you, and compare personalised quotes from top UK insurers.

To get started:

1. Select your age below
2. Answer a few short questions about your circumstances
3. Get your free quote from LetsGoCover