Let the taxman help you – not himself
If you are a director of your own company and pay for your own life cover, you could find getting your company to pay could save you a lot of money.
The chances are that if you already have life cover it is paid from net income; after National Insurance and Income tax. Even if the premiums are paid from the company bank account then those premiums will still be assessed as income in your hands and still be subject to employer’s and employee’s National Insurance as well as Income Tax.
This does not have to be the case. Legislation which gave favourable tax breaks to large company’s for providing death in service benefits to their employees, is now available to you on an individual basis. That means you, and any of your employees, can enjoy those tax breaks without the need to put a large group scheme in place.
These polices are known as Relevant Life Policies and are designed to be the most tax efficient way of providing life cover for your family should you die before you retire. For a higher rate taxpayer the saving is circa 49% over a premium paid from your net salary; for a basic rate taxpayer the figure is 31%.
The tax benefits of Relevant Life Policies include:
- Tax relief on the premiums for the employer in most cases.
- No tax assessment of premiums on the employee as a benefit in kind
- Premiums are not subject to National Insurance payments
- The benefit is free of Income Tax
- Benefits do not count towards the lifetime allowance for pension purposes
- Benefits are paid free of Inheritance Tax in the vast majority of cases.
In addition life assurance rates are particularly competitive across the market at the moment so there has never been a better time to review your cover.
For more information on Relevant Life Policies or any other aspect of Financial Planning contact Paul Smith or Richard Mills at Watson Buckle Wealth Management on 01274 516700.
