When looking for the best life insurance cover or best life insurance policy it pays to speak to a professional advisor. We get many calls daily with a myriad of different questions, all of which we manage to answer fully. After all, when looking for an affordable life insurance cover it pays to speak to someone who knows the market fully and can give you impartial, no-obligation life insurance quotes plus great advice at the same time! One question we do get asked, a lot, is about tax payable on life insurance payouts, so we put together a quick blog to describe the process of finding the best life insurance and how to avoid the fearsome taxman!
UK Budget 2020 Will Not Affect Great LifeInsuranceCover Services
Chancellor Rishi Sunak’s first budget of 2020 is likely to look closely at the dreaded issue of Inheritance Tax, possibly one of the most contentious and unpopular taxes demanded by HMRC and totalled £5.4bn during the 2018/19 tax year.
When it comes to Life Insurance, the questions that most often raises its ugly head are “is Life Insurance benefit taxable?” and “is life insurance benefit subject to inheritance tax on death?” Before answering those questions, let us take a look at why life insurance is so important for families.
Why do I need Life Insurance and Where to Find the Best Life Insurance?
We all need to realise the considerable importance and advantage of protecting loved ones financially should the worst-case scenario happen. Not only will those beloved family members have the heartache of losing a loved one, but also those additional pressures, those previously you dealt with together, that may prove overwhelming without you.
Helping them with the gift of life insurance protection provides financial peace of mind. Thus, easing the household finance responsibilities of paying the mortgage, everyday household bills and living expenses, debts and savings, school fees and college funds. A life insurance policy will go a long way to making life a little easier for those left desolated and struggling to cope.
Speak to the Best LifeInsuranceCover Services Advisors for the Best Advice
The team at LifeInsuranceCover Services are firm advocates in planning for the unexpected and fully believe in the advantages of a life insurance policy. One of the many queries clients ask when requiring advice is this question of the possibility of a tax bill when a loved one dies. Our role is to help families plan for unseen eventualities and provide guidance on these complicated issues. Rest assured that, in the vast majority of instances, when a person passes away and the beneficiary of their life insurance policy receives the benefit, this financial asset reflects as non-taxable income. Therefore, no tax falls due.
Nevertheless, a good advisor will let you know about any situations whereby the life insurance benefit may become the subject of taxable proceeds of which there are only a couple. If for some reason the sums paid out by the life insurance company remain held by the insurance company for an extended period, then any interest earned is usually subject to tax. This taxable income will only be on the interest, for example, a £200,000 benefit, held for say, six months, may accumulate £1,000 in interest. The taxman will scrutinise only this aspect of the figure. The original £200,000 of course still pays out to the beneficiary once released.
Pay No Inheritance Tax on Life Insurance Policy Payouts
Another, albeit rare, situation where HMRC might scrutinise the proceeds of a life insurance policy is where the payment is tied up within a beneficiary’s estate, for example, when a policyholder survives an intended recipient, and there is no one to pay.
Whosoever ultimately inherits the estate will benefit from the life insurance proceeds via the estate. The sum proportion of the estate reflecting the life insurance benefit may fall under the watchful eye of the taxman through inheritance tax and estate law.
Overall, there is no need to fear the taxman as life insurance payments generally falls into the right hands. However, it is worth making a note as to how to ensure your loved ones preserve the integrity of a life insurance policy payout, especially for valuable real estate and significant inheritance figures.
These rare scenarios can be avoided, and it is a good idea to examine the advantages of placing your life insurance policy in a trust.
The best life insurance policies placed in trust will ensure:
- Clarity over any disputes about your wishes for your life insurance benefit, thus avoiding disputes or unworthy claims over your assets.
- Circumvent any claim for inheritance tax by the taxman.
- Speed up probate and payout quickly the benefit of your life insurance policy to those that need it.
Call us today to get friendly, up to date, accurate advice on Best Life Insurance Policies
Speak to an advisor today regarding the possibility of trusting your life insurance benefit into a legal agreement, known as a trust. In this way, no matter what the outcome, the benefit of the life insurance policy remains fully protected from any other claim by the taxman or other body.