If you are a senior employee or company director
then a relevant life policy would be a far more tax efficient way of providing you with additional personal life assurance and/or to replace existing single life family protection policies.
What are the advantages?
So what is a relevant life policy?
- The premiums can be paid by the company without creating a taxable benefit in kind.
- Corporation tax relief is available on the premiums in the company’s accounts.
- In the event of a claim, the sum assured is paid free of tax to your nominated beneficiaries.
- The death benefit does not count towards the pension lifetime allowance.
- The premiums are not counted towards the pension annual allowance.
- There is no need to establish a group scheme for all employees.
- A way of providing the benefit for selected directors/employees.
- A way of providing insurance if there are insufficient employees for a group scheme.
What are the terms and conditions?
- It is a policy which provides individual life assurance.
- It is provided for the individual and paid for by the company.
- The level of life cover can be selected at any level up to a maximum of typically 15 x remuneration.
So what are the savings
- There must be an employer / employee relationship.
- The term of the policy can only be to age 75.
- The plan can only provide a lump sum death benefit.
- The policy should be written under a discretionary trust which is provided free of charge by the insurance company.
|Personal Insurance paid by you
||Employer funded relevant life policy
|Monthly premium paid from post-tax income
||Monthly premium paid by your employer
|Pre-tax income needed to fund £200 assuming income tax at 40% and employee National Insurance (NI) at 2%
||No income tax, employee’s or employer’s NI contribution
|Employer’s NI contributions at 13.8% on this amount of salary paid by the company
||No employer’s NI contribution
|Total cost to company and director
||Total cost to company and Director
|Less corporate tax at 20% as an allowable deduction. Salary, income tax and NI are allowable expenses against corporation tax
||Less corporation tax at 20% as premium is an allowable deduction
|Total cost to you and the company
||Total cost to you and the company
|A total saving of over 49% or £153.94 per month on a monthly premium of £200
For more information, please contact James Springham