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Did you know Life Cover is now classed as a business expense?

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Life Insurance is now tax-free and classified as a business expense.

Offering death in service benefits to you or your employees ensures they don’t have to worry about their loved ones should the unthinkable happen. Whether you’re a company director who wants to offer it to you and your staff, or contractor who wants it for your own family, Life Insurance has always come with hefty tax implications. But that’s no longer the case.

Changes mean big savings.

As a director or a contractor you probably aren’t aware of ‘A Day’ and why would you be. Back in April 2006 there was a big change in legislation (known as ‘A Day’). Though this was over a decade ago many people still aren’t aware of the significant savings involved.

Here’s what ‘A Day’ means for you:

  • Life Insurance premiums are not taxed on the employee as a P11.

  • Premiums can be offset as a business expense.

More affordable for contractors and Directors.

Known as Relevant Life policies, they are much more generous tax-wise. If you are a self-employed contractor or Director, you probably pay for your premiums out of your own pocket. However, you can now put them down as a business expenses, thereby saving money on tax. In the unfortunate event that your loved one has to claim, then the lump sum received is also usually free of income and inheritance tax too (unlike traditional Life Insurance policies).

Better business sense for company directors.

If you’re a company director, the tax savings can be considerable and offer a great deal of flexibility. Not only can they be classed as a business expense, they can also be taken out as a single Relevant Life policy to cover all your employees. This is done in the form of a discretionary trust, with the company paying one premium each month to cover all the relevant families/dependents. The savings for doing it this way can be for significant for your business.

For example, if you currently pay £50pcm, have 25 years remaining on your policy, and are a basic rate taxpayer the following would apply:
  • Your current monthly premiums paid personally by you from your take-home pay are £50.00.
  • With tax at 20% and NI of 12%, to net this amount your gross pay would need to be £73.53
  • Including employers NI at 13.8% the total cost to your company to net this amount is £83.68
  • This amounts to £1,004 annually, and with 25 years remaining on the policy the total is £25,103
  • By having your company take over the payment of the premiums for you, you could reduce your salary by £73.53without it making any difference to your disposable income
  • After 20% corporation tax relief, the cost to the company is only £12,000 instead of £25,103
  • By switching to a Relevant Life Policy, the ONLY change to your circumstances is an extra £13,103 in your company profits
* Assumptions made for simplification of the calculator:
Standard rate taxpayers NI at 12%, higher rate taxpayers NI at 2%, employers NI at 13.8%

 Providing you’re not a sole trader or an equity partner, Relevant Life Plans can offer almost all types of employees the benefits of Life Cover but with significant tax savings.

If you would like to know more about how you can become a Relevant Life Expert partner and accuratly inform your clients please email us: or to speak to an adviser please call 01202 700053

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