Relevant Life InsuranceMany business owners are unaware of a tax allowance that HMRC introduced for small businesses that could save you up to 49% on your personal life insurance. Specifically, it's called Relevant Life Insurance - read on to find out more... Contact us
What is relevant life insurance?
Are you aware that as the owner of a limited company, you can take out life insurance to protect your family and pay for it through your business?
This type of plan is known as Relevant Life Insurance and since premiums count as a tax-deductible business expense, there are some great tax benefits.
Benefits for you, as an employee
You don’t have to pay the premiums, so more money left in your pocket
Not treated as a benefit-in-kind/P11D benefit – so no National Insurance or Income Tax to pay
Benefits from the plan are tax-free and are paid to your family (not the business)
Benefits for you, as the business owner
Whilst the business will pay for the premiums, there is no National Insurance to pay
You can claim Corporation Tax relief on the premiums
Relevant Life vs Conventional Life Insurance
As you can pay for Relevant Life Insurance through your business, you can make some great savings.
For example, here’s how you can save 49% compared to conventional life insurance:
|Cost to the employee||Conventional Life Insurance||Relevant Life Insurance|
|Monthly premium (from net salary)||£50.00||£0|
|Employee National Insurance Contribution (2%)||+ £1.72||£0|
|Employee Income Tax (40%)||+ £34.48||£0|
|Total cost to employee||£86.20||£0|
|Cost to the employer||Conventional Life Insurance||Relevant Life Insurance|
|Total cost to employee (see table above)||£86.20||£0|
|Employer National Insurance Contribution (13.8%)||+ £11.90||£0|
|Total gross cost||£98.10||£50|
|Less Corporation Tax relief (19%)||- £18.64||- £9.50|
|Tax adjusted total cost||£79.46||£40.50|
As you can see from the tables above, the total saving with Relevant Life Insurance is £38.96 (49%) per month, which equates to a saving of £467.52 per year.
Please note – the illustrations are based on our understanding of current law and HM Revenue & Customs practice as at August 2018 which may change in the future. These tax calculations are based on 2018/19 tax rates and may also change in the future. Moreover, the calculations assume that the same rate of Income Tax/National Insurance applies to the whole of the premium or sums used to fund the premium.
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