As you can appreciate you have the responsibility of making sure your business is protected against many things, so you’ve no doubt insured your buildings, contents, stock and materials. However, it’s just as important to cover your biggest asset – yourself and any key employees you may have.
Did you know that as a director of a small business, you have a fantastic opportunity to benefit from tax savings on the cost of life insurance?
A Relevant Life Policy is a type of life insurance that allows you to tax-efficiently put financial protection in place for your family should the unthinkable happen to you.
The tax benefits
As well as making the overall cost of the life insurance cheaper, you’ll benefit from other tax advantages:
- your company will pay the premiums although, importantly these won’t be treated as a benefit-in-kind:
- neither you nor your company will have to make NI contributions on these premiums;
- your company can usually claim tax relief on these and,
- your family will generally receive a tax-free lump sum if the worst happens to you
Executive income protection
As part of your package, you and your Company could choose to put in place an Executive Income Protection Policy to sit alongside your Relevant Life Policy. This will allow your Company to continue paying you a salary, dividends, pension payments, P11D payments and Employers NI contributions whilst you are ill and not able to work, thus potentially aiding your recovery.
This could also provide tax benefits.
- Corporation tax relief (as long as the premiums paid are wholly and exclusively for the purposes of the business) and,
- No National Insurance contributions on the premium payments made to fund the Executive Income Protection Policy
It’s important to be aware that unlike a personal Income Protection plan, the proceeds will be paid to the employer and be subject to income tax and National Insurance contributions on a “pay-out” to you as an employee
I hope you can see what an excellent opportunity this is for you to protect yourself and your family financially and tax-efficiently.
Contact Richmond House to find out more, including how much we could save you on the cost of life insurance.
This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case. Based upon our understanding of UK tax law at May 2019. The value of investments can fall as well as rise and you may not get back the full value of your investment
Nigel Taylor Cert PFS, Dip FA