If you are a Director of a Limited Company or in a senior position, with the ability to influence the shape of your remuneration package, and you have a life assurance policy that you pay for personally, you may want to know about some significant tax savings that are available.
If you don’t have any life assurance yet, but think that you should, then now is the time to look at putting a plan in place, that’s paid for by the company, is fully deductible for the purposes of Corporation Tax, does not incur a National Insurance surcharge and which is not taxed as a benefit in kind. Furthermore, the final payout on death is also free of any tax, including Inheritance Tax.
So, in short, if you are already paying for life assurance out of your own pocket, you could make savings in excess of 50% of the current cost of making this provision using a type of term assurance policy called a Relevant Life Plan.
Who can benefit?
- Directors wishing to provide their own individual “death in service” benefits without taking out a scheme on all employees.
- High earning individuals, such as directors, where “death in service” benefits may interfere with their lifetime pension allowance.
- Employers looking to provide “death in service” benefits, but with too few employees to set up a group scheme.
- Members of “group death in service schemes” where the benefits only relate to their basic salary and not their true earnings.
Relevant Life Plans are not available where there is no employer/employee relationship. For example, sole traders, equity partners of a partnership or equity members of Limited Liability Partnerships are not eligible for these policies, although their employees are.
What’s more, if the company is subject to a takeover, merger or goes into liquidation, the individual concerned does not have to lose their life cover. This is also the case, in the event that they are laid off, sacked or retire on the grounds of ill health. Because the policy is for the benefit of the individual’s dependents, they can take the policy with them when the relationship with the employer ceases, rather than have to apply for life cover all over again, at a time when their health may have deteriorated.
For more information, contact one of our specialist advisors, on 01462 440088.