Tax Efficient Life Insurance - Paid To Your Family - Business Pays The Premiums!

Tax Efficient Life Insurance - Paid To Your Family - Business Pays The Premiums!

Relevant Life Cover

Relevant Life Cover is a tax efficient way for a business to offer death in service benefits to its employees and offers an alternative to group life schemes.

It can be a valuable addition, or a starting point for any benefits package, whilst helping to retain your best people or recruit new talent.

Any employee of a business qualifies, including shareholder directors. Benefits are paid into a discretionary trust for your family.

Qualifying criteria:

• Do you have an active role in the business?
• Do you take PAYE income?
• Are you employed by the business?
• Is the business a trading entity?

How it works

• The employer takes out a policy on the employee and pays the premium
• Cover levels can be up to 25 x salary, and, or dividends
• The policy term cannot exceed the employee's 75th birthday
• The benefit is payable on death or terminal illness and can be level or be increasing
• If the employee leaves the business, they can take the cover with them
• There is no surrender value

Advantages of Relevant Life

For the business

• No National Insurance contribution on premiums and corporation tax relief.

For the life assured

• No capital gains tax
• Benefits are not taxed as a benefit in kind
• No Capital Gains tax
• No National Insurance contributions on premiums or benefits
• Any payout is to a trust and therefore not included within the estate helping with inheritance tax
• Benefits do not count towards annual or lifetime allowances tax benefits

Relevant Life Tax Treatment

Assuming the policy is set up correctly HMRC will treat the premiums as an allowable expense which means they are not included as a P11D benefit. This means the premiums and benefits usually qualify for relief on:

•Income tax
•Capital gains tax
•Corporation tax
•National insurance

Of course rules on taxation can change but for now, you are looking at massive advantages and huge savings against normal life insurance.


Relevant Life Cover FAQ


Is Relevant Life Insurance tax deductible?


One of the main benefits is the fact that it is seen as a company expense and is, therefore, tax deductible. The policy is also placed in a trust which is outside of the estate. This can help with inheritance tax issues as well. Information regards to taxation levels and the basis of reliefs are dependent on current legislation. Individual circumstances are not guaranteed and may be subject to change. The Financial Conduct Authority does not regulate trusts.

How long should we take out the cover for?

As everyone knows the likelihood of death becomes higher as you get older. Relevant life plans are normally a guaranteed premium so its good to lock the premium in when you are young for as long as you can. Some providers will allow a term up to age 70.

Can we add critical illness?

Yes, you can now add critical illness to a relevant life policy.

Will I have to have a medical?

This depends on age, health and sum assured. Policies over £500,000 normally always require a medical no matter where we place it.

Can a medical be carried out at home?

Depending on where you are in the country a nurse can come out to your workplace or home. It may be necessary to visit the nearest surgery.

Is there a limit on how much Relevant Life Insurance I can take?

The limit is normally 20x salary. However normally anything under £1.000,000 is fine for anyone.

Can anyone take out a Relevant Life Policy?

You have to be employed by a UK Ltd company or UK LLP to take out cover.

Who can take out a Relevant Life Plan?

UK Limited companies or Limited Liability Partnerships (LLP’s) The life assured has to be a UK resident.

Who owns the policy?

The policy is owned by the company. However, any claim would be paid to a trust which is run by the trustees.

Can I transfer Relevant Life Insurance to another company?

You can transfer the policy to a new company or to a personal policy.

How much is does it cost?

Relevant Life Insurance is normally very similar in cost to a normal term life insurance. However not all providers in the market offer relevant life so the market is somewhat smaller. However, due to the tax advantages of a relevant life policy, you can make huge savings. Use our relevant life calculator to see how much you could save. You can also use out the enquiry form to get a quote for relevant life insurance.

How long does it take to set up a policy?

Once an application has been submitted to the underwriter is can take anything from a few days to a few months to underwrite. It really depends on many factors including the health of the life assured. Normally a healthy person should expect to have a policy up and running within 2/3 weeks. Relevant life cover needs a trust document to be filled in by the life assured which normally means witness signatures. We normally find that this is the part which may hold up the policy underwriting. Of course, normal underwriting such as waiting for GP reports or medicals to take place is reliant on a third party so it's sometimes down to the client. There are providers which allow us to fill in the trust documents online which means that a clear policy can be accepted and started straight away.

Does it have to be a UK company to take out the cover?

Yes.
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Can an LLP take out Relevant Life Cover?

Yes LLP’s are treated the same as limited companies.

How much should I insure the person for?

Although a relevant life policy is seen as business protection its really for the benefit of the life assured’s family through a trust. So its really down to the individual to decide the level of cover. We normally suggest people take into account outstanding debts such as mortgages but also think about the money that the remaining family will need for general living. Relevant life insurance is can be taken out at up to 15x or 20x the person's salary.