is death insurance money included in inheritance tax
The proceeds of a life insurance plan are not usually liable for either income or capital gains tax. But if youâre not careful, inheritance tax (IHT) could take a big chunk out of the policy payout. Inheritance tax is paid at 40% on the value of your estate above the so-called nil rate band of Â£325,000.In other words, if your estate was worth Â£500,000, the IHT bill could be 40% of Â£175,000, or Â£70,000.o, if your family is likely to be liable for IHT on your estate after your death, you can arrange life insurance to pay the bill. However, tax is a complex subject so you should talk first to a specialist advisor.