The growing number of families being drawn into paying inheritance tax (IHT) is driving them to take out insurance against future tax bills, according to Evelyn Partners.

The wealth management firm noted families were doing this to ensure future bills did not become a burden on their beneficiaries.

A report from TWM Solicitors showed that the total value of life insurance sales had risen from £378m to £447m year-on-year at the end of March 2025, an increase of 18 per cent.

Evelyn Partners’ protection team added that all providers offering whole-of-life cover reported a significant increase in sales last year.

Thousands more families are being brought into the scope of IHT over the coming years amid the long-term freeze on nil-rate bands and reforms to reliefs and exemptions.

According to the Office for Budget Responsibility, around one in 10 deaths will be subject to IHT by 2029/30.

“It is often said that IHT is hated by the many and paid by the few – but that is set to change,” said Evelyn Partners head of estate planning, Ian Dyall.

“The tightening of IHT rules and reliefs will draw thousands more families into the scope of this contentious levy over the coming years.

“Together with the long-term freeze on nil-rate bands and gifting exemptions, this means not only that more estates will become liable for IHT, but also that more assets within liable estates will become taxable.”

Dyall noted that good estate planning was effective at holding back the incoming tide of death duties, with a combination of reliefs, gifting and trusts being commonplace features of a strong strategy.

However, as rules tighten on reliefs and exemptions, more families and their advisers were reaching for the security of insuring against the IHT liability, he added.

“In practical terms, the most common way a life policy is used to mitigate IHT is through a whole-of-life policy written in trust,” Dyall explained.

“The cover is designed to match the expected IHT exposure after reliefs and exemptions, and is often used alongside steps to reduce liability, such as lifetime gifting.

“Premiums are paid during lifetime, and because the policy pays out on death whenever that occurs, the family has the security of knowing that funds will be available to pay the tax bill when it arises, preventing any forced sale of assets.

“The policy should be written in trust so that the payout sits outside the estate and does not itself increase the tax liability.

“All in all, the role of insurance in estate planning is not to remove tax, but to make a known liability manageable and predictable.”

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