Pensions are a huge benefit of being a contractor. You may have [...]
Have you thought about protection for your family in the event of your death?
Relevant life is a life insurance policy available to employers and Limited companies to provide an individual death in service benefit for an employee/Director. It can be a very tax-efficient way for shareholder directors to take out life insurance.
The following information is based on our understanding of current legislation, taxation law and HM Revenue & customs (HMRC) practice, which may change.
There can be tax benefits for both the employer and employee.
Also, the claim amount isn’t subject to any income tax, corporation tax or capital gains implications where the relevant life policy is held in a trust.
Based on a life assurance premium of £100 per calendar month
|Relevant Life Calculator|
|Is the premium paid from dividends:||Yes|
|Is the person covered resident in Scotland?||No|
|What is person covered’s highest rate of tax:||20.00%|
|Total other dividend income:||£30,000.00|
|Company corporation tax rate:||19.0%|
|Employee income tax rate:||7.50%|
|Employee National Insurance Rate*||0.00%|
|Employer National Insurance Rate||0.00%|
* assumes contracted in to State Second Pension
|Ordinary life policy|
|Employee national insurance||£0.00|
|Employee income tax||£8.11|
|Employer national insurance||£0.00|
|Corporation tax relief||£0.00|
|Gross Dividend needed||£108.11|
|Corporation tax paid||£25.36|
|Gross Profit to pay dividend||£133.47|
|Relevant Life policy|
|Corporation tax relief||£19.00|
The tax savings can be considerable as the premiums are classed as a business expense.
If you would like to review your life assurance position, please do get in touch and one of our protection specialists would be more than happy to help.