Our Blog

Read more

Blog

The Secret to Tax Efficient Life Insurance for Business

Many employers offer employees life insurance as part of a competitive benefits package. If you don’t have a group life insurance policy it means a separate life insurance policy for each employee. This means that each policy is subject to income tax, corporation tax and national insurance contributions (NIC).  With Relevant life insurance, you can provide a ‘death in service’ benefit for your employees that is a tax efficient. As a tax efficient life insurance policy, relevant life cover is exempt from income tax, corporation tax and NIC.

What is relevant life insurance?

Relevant life insurance is a ‘death in service’ policy that provides tax efficient life insurance for each employee. The policy is a paid for by the employer and offers financial security for the employee and their loved ones. The policy pays out a lump sum to their beneficiaries of the employees dies whilst employed with the company to help provide financial support during a difficult time. It is written for a set term and can also include critical illness cover.

A tax efficient life insurance policy

Relevant life insurance is similar to most types of individual life insurance policies. The only difference is that it benefits from tax relief. As it is paid for by the employer it is not classed as a P11D benefit-in-kind. This type of benefit and is therefore subject to tax. Relevant life insurance, however, can be classed as an allowable business expense. It is, therefore, exempt from paying income tax, corporation tax and national insurance contributions. Further to this, the policy is placed in a trust so inheritance tax is not required to be paid either.

Who is relevant life insurance for?

Relevant life insurance is a benefit provided to employees from the employer. There needs to be an employer to employee relationship for the policy to be eligible. Therefore, it can still be used for salary-paid directors and owners. It is an individual policy that lasts during the time the individual is employed with the company.

How much cover do I get?

Relevant life cover can be tailored to suit your specific needs. As a business, you can decide how much cover you’d like to offer your employees. When the employee leaves, their relevant life cover can be cancelled or they can switch it to a personal cover or transfer to another firm. Your premiums are based on how much cover you would like to take out along with the overall health and wellbeing of the individual you’d like to insure.

To find out more about tax efficient life insurance and relevant life cover, get a free quote with Business Cover Expert or check out our FAQs on relevant life insurance.