Relevant Life Policies
Are you a company director looking to provide life assurance to help provide financial security for your family or your employees?
Providing death in service benefits for your employees can inadvertently create potential tax problems for those high earners with substantial pension funds. Are you having trouble getting access to a group scheme because your company is considered to have too few employees?
Taking out a Relevant Life Policy could be a tax efficient way of helping to provide the valuable life cover and financial security you want for your family or employees. These policies are designed for individual employees who may require:
- more life cover than the main Company scheme provides or,
- where the number of employees is to low for a company group scheme
The policy premiums are paid in a more tax efficient way be the company compared to employees paying for their life cover benefits personally. The goods news is, company directors like yourself working day to day in a business on a Pay As You Earn (PAYE) basis, are likely to qualify for this arrangement whereby you could also take out life cover to help protect the financial security of your loved ones.
Why should I take out a relevant life policy?
The plan is restricted to providing life cover only and cannot contain any waiver of premium, critical illness or income protection benefits and must cease before the life assured’s 75th birthday.
Your company can pay the policy premiums usually as an allowable deduction without them being treated as a benefit in kind, which means:
- as the employer, your policy premiums are treated as a business expense and are likely to be an allowable deduction against Corporation Tax
- there is no liability for National Insurance for you or your employee
- there is no Income Tax liability for your employee
- the benefits are paid tax free to their nominated beneficiaries
- the policy premiums do not form part of an individual’s annual or lifetime allowance.
Please bear in mind that tax treatment depends on your individual circumstances and may change in the future.