Relevant Life Insurance & advice
Relevant Life Insurance
Many 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...
- For Businesses
- Relevant Life Insurance
What is Relevant Life Insurance
Relevant life insurance is a policy that helps safeguard employees who aren’t eligible for their employer’s group scheme or have opted out for some reason.
This type of policy offers life cover and tax-efficient ways for businesses to provide their key employees and directors with the necessary cover they need. It’s a cost-effective way for small businesses to offer valuable employee benefits since the premiums are tax-deductible, and the benefits paid out to the employee’s beneficiaries are tax-free.
If you’re looking for an efficient and affordable option for providing life cover for your employees, this policy might be just what you need.
What Benefits Are Available For Employees
- 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)
What Benefits Are Available 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
Please note this is just an example, and quotes may offer better pricing. 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 |
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.
| Cost to the employer | Conventional Life Insurance | Relevant Life Insurance |
|---|---|---|
Total cost to employee (see table above) | £50.00 | £0 |
Monthly premium | + £1.72 | £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 |