UK taxpayers will waste £448 million this year due to poor inheritance tax planning when it comes to their life insurance policies, according to unbiased.co.uk’s annual Tax Action Report.

Under current tax rules, life insurance policies are usually free of personal liability, however in certain circumstances the payout may be subject to inheritance tax.

According to unbiased.co.uk, there are ways round this problem, such as putting the insurance policy 'into trust', which would remove the asset from the estate. However, many people are unaware that these solutions exist.

Karen Barrett, chief executive at unbiased.co.uk, said: “People spend their lives providing for their loved ones, yet their ‘lack of action’ when it comes to planning their affairs for after they have gone could lead to a hefty inheritance tax bill, not to mention additional stress for the family and potential delay in distributing assets.”