Save up to 50% in tax by putting life cover on your company’s expenses

A relevant life policy can result in significant savings for company directors looking to take out life insurance, however without financial guidance and advice, many directors and business owners are unaware of these types of plan.

A relevant life plan operates the same way as any other life insurance policy. The plan is set up on a fixed term such as to retirement age, and if you pass away during that time the insurer will pay out a lump-sum amount and this can be payable to your family.

The significant difference between a relevant life plan and a standard personal term assurance plan is that the relevant life plan is owned and paid for by your business.

The policy premiums are deductible for corporation tax purposes. As such, the policy premiums are not treated as a Benefit-in-Kind on you or your employees, nor are they subjected to Income Tax and National Insurance.

All employees in the business are eligible for relevant life plans. Relevant life provides major advantages for small businesses who aren’t eligible for group life schemes. Particularly, for businesses who may only have one or two directors. It allows them to provide a competitive benefit for their staff on an individual basis.

Another key benefit is that the policy is written into a trust. This trust protects your family from paying inheritance tax on the proceeds, which means they receive the full payout.

In addition, relevant life insurance is not included as part of your lifetime pension allowance either. This means that, business directors with substantial pension pots can benefit further, as having the cover in place does not restrict the level of pension savings they have before becoming subject to Lifetime Allowance charges on their pension.

How do the tax savings work?
Assume a plan costs £100 per month, for a company director who is a higher rate tax payer (I.e. their marginal rate of tax is 40%) the difference in tax treatment between a standard life cover plan versus a relevant life cover plan is as follows:

If you are a business owner and are looking to take out life cover for yourself or business partner(s), and relevant life cover sounds like it may be right for you, talk to us and see if we can help save you tax whilst ensuring family peace of mind.
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