Although the Budget contained relatively few measures directly affecting the life insurance industry, several developments remain relevant to advisers and their clients.
Higher Tax Rates on Savings and Property Income
From April 2027, the tax rates applying to savings and property income will rise to 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers. The same increases will affect trustees. Against this higher-tax backdrop, overseas insurance bonds may continue to offer valuable planning flexibility through tax deferral, gross roll-up, the 5% tax-deferred allowance and, where appropriate, assignment to family members or beneficiaries.
Tax Thresholds and Inheritance Tax
There were no significant changes to the main Capital Gains Tax rates or the Inheritance Tax regime. However, personal tax thresholds remain frozen until 5 April 2031, while the Nil Rate Band and Residence Nil Rate Band remain frozen until the same date. Previously announced changes bringing unused pension funds on death within the scope of Inheritance Tax will also take effect from 6 April 2027.
Advisers should therefore continue to review clients’ investment structures, estate-planning arrangements and expected sources of income. The full UK Budget summary provides further detail on the measures announced and their potential planning implications.