Tax efficient Life Assurance Cover for Limited Company Directors

David Fear of Roebuck Mortgages and Protection Limited explains how a Relevant Life Policy works and it could be more cost effective for company directors.

Many company directors are unnecessarily paying personally for life protection cover,  when it is likely to be significantly cheaper for the company to pay the premiums as a business expense through a Relevant Life Policy. It would be particularly cost effective, when considering the fact that inflation and interest rates are likely to remain higher for longer, for most people to remove their personal direct debits for life assurance and long-term sick pay.

What is a Relevant Life Policy?

A Relevant Life Policy is a single life plan, taken out on the life of an employee by an employer to provide death in service benefits. They are designed for individual members who may require life cover over and above that of the main company scheme already available to them or, where the number of employees is too low for a company group scheme.

In certain circumstances a company can make the payments, usually as an allowable deduction, without the premiums being treated as a benefit in kind, which means:

  • Payments are treated as a business expense and are likely to be an allowable deduction against Corporation Tax for the employer
  • No liability for the employer or employee to pay National Insurance
  • No liability for the employee to pay Income Tax
  • Benefits are paid tax free to the nominated beneficiary (-ies)
  • These payments do not form part of an individual’s annual or lifetime allowance (which could come back with a change in government)
Who might benefit?
  • Any clients with a mortgage
  • Any clients with a financial dependant
  • Any clients with children
  • Clients looking to protect maintenance payments in the case of divorce.

In summary, life assurance premiums that are paid for personally are paid from income net of Income Tax and National Insurance, by changing this to paying through a limited company the premiums are entirely a business expense (as is the case with a pension contribution).

Why get Professional Advice?

A professional adviser ensures –

  • The policy is in Trust so the right amount of money goes to the right person at the right time
  • The correct level of cover is in place
  • The cover is within the parameters of what the Inland Revenue will allow
  • Help select a reputable and competitive provider
  • Facilitate the advice process

To discuss your circumstances with our highly experienced Independent Protection Specialist, please contact David Fear of Roebuck Mortgages and Protection Limited. Call 07856 753009 or email Alternatively book a meeting here Calendly: David Fear.