Relevant Life Assurance
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Relevant Life Assurance

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.

 

Tax Benefits

There can be tax benefits for both the employer and employee.

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Employer benefits:

 

  • Corporation tax relief (so long as the premium are wholly and exclusively for the purposes of the business).
  • No National Insurance Contributions to pay on the policy payments paid to the fund the relevant life policy.

 

Employee benefits:

 

  • No National Insurance Contributions to pay on the policy payments to fund the relevant life policy.
  • Can benefit from their employer making the policy payments and these aren’t subject to tax as a benefit in kind or remuneration.
  • Policy payments and benefits don’t count towards annual or lifetime pension allowances.
  • Can generally provide their family with a tax-free lump sum if the worst happens to them.

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.

 

Example tax saving:

 

Based on a life assurance premium of £100 per calendar month

 

How much could a relevant life policy save your clients?

 

Relevant Life Calculator
Is the premium paid from dividends: Yes
Is the person covered resident in Scotland? No
Premium: £100.00
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
Net Cost £81.00

 

Total Saving 39%

 

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.

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