Tax Efficient Life Insurance for Company Directors Reply

I have recently taken out Relevant Life Insurance and this explain why.

When you are formally employed and working for a large company, you can benefit from group life schemes and death in service.

When you work for yourself however, as a contractor and company Director, you will likely be paying for life insurance out of your own pocket and taxed income.

This no longer needs to be the case.

Relevant Life Insurance was designed to afford small businesses the opportunity to benefit from the same tax breaks large corporations enjoy through group life schemes. Essentially,
a Relevant Life Policy allows for you to pay your personal life insurance through your company and as a business expense, rather than through taxed income.

Paying for your life insurance through your business in this way means that you can make significant savings:

Let’s use the example that you own your own business and pay £100 a month on life insurance from your own pocket.

If you’re a 40% taxpayer, there’s income tax and 2% employee national insurance contribution, plus 13.8% employers’ national insurance contribution.

In fact, after 19% corporation tax relief the net cost to your company works out at £158.93

If you pay £100 a month for a Relevant Life Plan you won’t pay any national insurance contributions or income tax on the premiums but you still get the 19% corporation tax relief which means the net cost is only £81.

That’s a saving of £77.93 a month or £935.16 over the year.

To qualify for a Relevant Life Insurance policy you or your client simply need to be a salaried Director or an employee of a limited company and resident in the UK.

steve@bicknells.net

How do calculate property capital gains tax? Reply

Assuming you own the property personally and its not your main residence (and benefiting from Principle Private Residence Relief), there are 2 rates of capital gains tax 18% for lower rate tax payers and 28% for higher rate tax payers.

You also have a CGT allowance which for 2018-19 is £11,700.

As a rough guide to assessing the tax

  1. Work out how much you have earned – Salary, Pension, Dividends etc
  2. Calculate your taxable gain  + Sale Price – Sale Costs – Purchase Price – Purchase Costs – Improvements
  3. You can then deduct the CGT allowance of £11,700 from the Gain (assuming you haven’t used against other gains)
  4. If the total of 1 to 3 comes to more than £46,350 you pay 28% tax on the capital gain, if the total is less than £46,350 you will pay 18% on the gain until you hit £46,350 then pay 28% once you exceed it

You can now pay CGT straight away using the HMRC online service but most people do via self assessment and pay by 31st January following the end of the tax year.

 

steve@bicknells.net