5 days ago
Families rush to take out life assurance ahead of Reeves's inheritance tax raid
Rachel Reeves's inheritance tax changes have sparked a scramble for life assurance as people seek financial security for their families, experts have warned.
In her maiden Budget, the Chancellor introduced a £1m cap on business and agricultural property relief from next year, and will move pensions into consideration for inheritance tax from April 2027.
Insurance broker, LifeSearch, said sales of whole life cover, also known as life assurance, have increased by 230pc since last autumn, while major providers, Royal London and VitalityLife, also reported surges in enquiries.
One expert said the Budget had created 'a real problem' for inheritance tax planning, while another said business owners and farmers were now pursuing life cover for the first time.
When she delivered her Budget last October, the Chancellor confirmed new inheritance tax rules for business owners, farmers and unspent pensions.
In the event of the owner's death, inheritance tax will now be charged on 50pc of the value of business or agricultural assets above £1m from April 2026. Pensions will also be considered for 40pc inheritance tax 12 months later – leaving some families facing an effective tax rate of over 90pc.
Experts said the changes had led to an increase in life assurance policies. These are more expensive than life insurance policies because they pay out regardless of when death occurs, so they are often purchased to cover future inheritance tax bills.
James Robinson, of advisers Forvis Mazars, said: 'The Budget has created a real problem for people thinking of their pensions or business as being inheritance tax efficient.
'Almost all of our clients want to talk about the inheritance tax changes in some way. We saw a steady increase in the run-up to the Budget and since then, we've seen a marked increase in these conversations.
'It's more of a shock for business owners. They will need to figure out how they fund this tax charge and whether this could affect original plans for the business. It could create a risk for how the business continues in the right way and in the right hands if a proper plan isn't put in place by the time the changes take effect.'
Alan Richardson, of LifeSearch, said the Chancellor's changes had also led to business owners and farmers starting to take out policies.
He said: 'For the first half of our financial year, which started in September, we've seen a 230pc increase in whole of life policies for the purpose of inheritance tax.
'Before the Budget was announced, we never got a business or a farm owner phoning us up to talk about inheritance tax liabilities, but we do get that now.
'It's also interesting that the average age of people asking for whole of life has dropped off. Historically, it's been 60 to 63, but we're getting younger people now asking about inheritance tax.'
Many insurers sell their life products directly to customers, but then cover their risk with larger global companies, known as reinsurers.
One such multinational reinsurer, Gen Re, reported an 18pc increase in its sales of whole of life policies during the first three months of 2025 compared to the same period last year.
Kevin Carr, a financial services specialist and former independent financial adviser, said this was due to the Budget.
He said: 'Gen Re's data shows a substantial increase in the take up of whole of life insurance in the UK, which is no doubt related to last year's Budget and the pending inheritance tax changes.
'It's not driving the mass market, which is people buying it for their mortgage at £20 a month, but I certainly know lots of advisers that specialise in the market where people want to cover their inheritance tax liability and they've been incredibly busy since the Budget.
'People are looking at the changes, seeing an even larger bill than they'd expected and are taking steps to provide for their loved ones.'
Major UK insurers also confirmed they were being approached more often.
Royal London revealed a 50pc increase in quotes for protections linked to inheritance tax, while VitalityLife also said it had seen more people looking for and buying life insurance.
