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Inheritance tax could undermine life insurance

Date: Tue, 04 Apr 2006

Recent changes to inheritance tax rules could undermine some life insurance policies, claims the Association of British Insurers (ABI).

The ABI believe that around 1.3 million life insurance policies written in trust could be affected by a government crackdown on inheritance tax planning, reports Reuters.

The Treasury had originally estimated that only 23,000 policies would be subjected to the new changes and mainly restricted to the wealthiest one per cent of the public. The ABI are now planning to hold talks with the government over the proposals to discuss its concerns.

Peter Vipond, director of financial regulation and taxation at the ABI, said: "We are concerned not just about the policy change but about the way the government has done it. It has touched a technical area and it is not obviously an avoidance area and it could have consulted on this."

However, the Treasury stressed that many normal life insurance policies will remain unaffected by the changes as they are no held in trusts.

A spokesman from the Treasury explained: "Normal life insurance policies simply do not create trusts that would be subject to inheritance tax under the new rules."


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