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

Save Tax with a Relevant Life Plan 1

Life Insurance

No one enjoys paying out on insurance premiums but why not take advantage of a great “tax break” when it comes to providing life assurance for your family?

It’s called a Relevant Life Plan and it works as follows;

Most directors pay for family life assurance out of their “taxed” net income and therefore for example a £100 per month premium has really cost approximately £145 when you add back in the tax and N.I.

If you were to pay for this via a Relevant life Plan then your company can make the payments for you and its classed as a business expense therefore saving on Corporation Tax. In this instance the £100 per month would now have a real cost of £80 per month. More good news is that it’s NOT a P11d benefit and the policy is written into a special trust which means on death the proceed go straight into the trust (for the benefit of your family) and not back to the company.

I found details of this policy at www.direct-fs.co.uk

steve@bicknells.net