You can save up to 47% on your life insurance premium if you are a company director or an employee of any organisation. Traditionally personal life insurance cover is paid for out of your taxed income. Such income will have already been subjected to employers and employees NI, and taxed at your marginal tax rate.
This can now be done before any tax is paid if purchased as a “Relevant Life” tax efficient plan where the premium is taken directly from the gross business income. The premiums for a relevant life plan are paid for by the company or your employer for qualifying directors and employees.
It is important you are fully aware of the method and benefits of having a relevant life plan, these are summarised below.
- For qualifying directors and employees only.
- Not for partners in a Partnership.
- Must contain life cover only (but can also include terminal illness cover).
- Must end before the insured 75th birthday.
- Require the use of a Relevant Life Trust.
- Premiums are paid tax efficiently by the employer (company).
- Premiums paid as allowable deductions without being treated as benefit in kind.
- Policy premiums don’t form part of an individual’s annual allowance for pension contributions.
- Death benefits do not form part of an individual’s lifetime allowance for pension savings.
- No employer or employee NI on premiums.
- Benefits paid tax free to nominated beneficiaries.
- Premiums are a business expense and are an allowable tax deduction against Corporation Tax.
- Policies can be kept by the life assured if they move company.
So who should consider a Relevant Life Plan?
- Suited to all directors and employees for whom the company wishes to provide life insurance e.g. death in service.
- Where a company is obliged by their employees contract to provide death in service benefit.
- Where individual employees who may require life cover over and above that of a main company scheme already available to them, or where the number of employees is too low for a viable and economic company group scheme.
- All high earning employees where the combination of the lifetime pension allowance and a death in service benefit would exceed the lifetime pension saving of £1.25m.
- Where there is a need for additional level of cover over the free cover level in a death in service scheme.
- Clients who have exceeded the maximum age limit set in a death in service scheme.
So what should you do?
Whether or not you already have life insurance, now is the perfect time to ask Premier Choice to carry out a review as you may be better off with a Relevant Life Plan.