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Is a life insurance payout taxable?

Life insurance payouts are not taxable. When the payout is for things like critical illnesses and other types of life claims, these payouts are issued completely tax free. So you do not need to worry about paying any kind of income tax or capital gains tax on these amounts. However, according to tax rules, inheritance tax is applicable in many circumstances when the beneficiary starts getting insurance due to the death of the original insurance holder. According to the current legislation, life insurance inheritance tax is charged at 40% on estates over £325,000.

How can you prevent this payment of tax? The best way to handle the payout of insurance is to set up a trust. A Trust may sound like a complicated term but all you need to do is speak to one of our financial advisers and they will help you in setting up a trust which is best for you and your family. Just complete our online form and an adviser will contact you to advise and explain further. A trust helps in a number of ways. Firstly, payouts which are from the trust are completely tax free. Secondly, once this trust is set up, it is easy to manage it and payments are received a lot faster through it. These trusts are very helpful when a person wants to leave all the assets and insurance to their family. It ensures that the family will receive payments on time after the person's death without any hassles or complications.

If you are the kind of person who wants to leave all your money to charity, you do not need to bother about the tax rules. Payments made to charity are exempted from tax. But whichever way you want to leave your money, remember that a lot of rules with regard to insurance can keep changing and it is important to keep your money as safe as possible so that the people who will receive it after your death will have easy access to it.

How to choose

You can select the length of your ideal life insurance quote and also the maximum value of the policy. Use the sliders and then continue to get a free quote.

Length of life insurance

For how many years do you think your family will need to rely on you financially and in how many years will they be able to be financially independent? Some people like to choose a policy that takes them to when the children turn 21, for example.




You have selected 20 year


Maximum value of life insurance

There really isn't a definitive answer for this question but try to factor in the value of your mortgage that needs paying off, a few years of your salary and the values of any debts that will need paying.


MIN £5000

MAX £500,000

You have selected ?10000


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