Save up to 66% on Life Insurance with a
Relevant Life Policy
Recognised as an allowable company expense ✅
✅ Up to 25% Corporation Tax Relief
✅ No employer or employee National Insurance
✅ No Income Tax
✅ No Benefit in Kind Tax
✅ Typically save between 40% and 66%*
✅ Significant savings to be made compared to personal life insurance
✅ Written in Trust to protect against Inheritance Tax
We have access to a comprehensive panel of 5 Star Defaqto Rated insurers which gives one the confidence to choose the right financial products, thanks to an unbiased, at a glance assessment of quality you can trust.
HOW DOES IT WORK?
The employer/ business takes out the plan on the life of an employee or director. The plan can be written to a maximum age of 75 and can contain flexible continuation options should an employee or director leave employment.
Generous sums assured are available (subject to criteria) and the plan is set up from outset in a specific discretionary trust, called a Relevant Life Plan Trust.
This ensures the proceeds do not fall into the estate of the deceased, thereby ensuring much quicker access to funds and also ensures the proceeds are paid free of Tax.
TAX EFFICIENT
TAX-DEDUCTIBLE
TAX FREE
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Tom is a 40 year old company director (business owner) and is considering life insurance through the business as opposed to buying it personally.
He has a quote for both personal life cover and relevant life cover. Both products are for £1 million to provide much needed protection for his family and are for the same term, ending at age 75.
The cost of the premiums for each of these plans are identical, as we would expect from most providers. So which does Tom select? They both look like the same benefit for the same premium. And they are.
Relevant Life Plans are not cheaper than personal cover. In fact, they're usually the same cost. The savings are made simply by having the right type of policy in place which qualifies for the beneficial tax treatment.
The following tables demonstrate the difference in tax treatment between a personal life insurance policy and a qualifying relevant life policy. Tom can choose to pay for his own policy from post tax income, or he can elect that his business provides the valuable cover he requires.
Lets have a closer look at the savings
Personal Life Policy
ANNUAL PREMIUM
Gross earnings Required
to pay premium
Employee National Insurance Paid (2%)
Employee Income Tax Paid (40%)
£1000.00
£1724.14
£34.48
£689.66
Employee net pay (£1000)
Employer National Insurance Paid (13.8%)
Corporation Tax Relief Granted (20%)
£237.93
-£392.41
Net Cost to Tom
£1569.66
Relevant Life Policy
ANNUAL PREMIUM
Gross earnings Required
to pay premium
Employee National Insurance Paid
Employee Income Tax Paid
Employer National Insurance Paid
Corporation Tax Relief Granted (20%)
Net Cost to Tom
£1000.00
N/A
N/A
N/A
N/A
-£200.00
£800.00
If Tom selects this option he is £769.66 per year better off compared to the personal plan shown, equivalent to a saving of 49%. In this example, Tom will save around £27,000 over the term compared to a personal policy.
How much can you save?
Tax Efficient
In this example Tom is a higher rate tax payer. If Tom was a basic rate taxpayer the savings could still be as much as 40%.
If Tom was an additional rate tax payer and paying himself dividends the saving could be as much as 66%.
Based on current tax legislation 2023/24 tax year.
There can be significant differences in cost depending on how one arranges life insurance. If you'd like to see how much you can save, get in touch below.
FAQ's about Relevant Life Insurance
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CAN MY FINANCIAL ADVISER DO THIS?Yes, if this is what they specialise in. Advisers are able to provide advice on business protection insurance products if they hold the necessary authorisation. The predominant focus of advisers in the protection sector is on recommending and facilitating personal protection plans, which do not optimise tax considerations. Guidelines usually restrict advisers from offering guidance or facilitating transactions related to tax-efficient business protection insurance products unless specifically authorised by their firm. Business protection products entail greater intricacies, chiefly attributed to the diverse tax implications surrounding their structuring. They can be litigious if set up incorrectly. If you're a company director and your adviser hasn't got you set up with tax efficient insurance plans already, it's probably because they they're not able to do so.
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WHAT HAPPENS IF I CLOSE MY BUSINESSIf you set up a Relevant Life policy for an employee or director who eventually decides they want to leave while the policy is still active, there are a couple of options available to you and them. They can, if they want to, cancel the plan and they’ll no longer have the protection. They can carry it on as a personal life insurance plan. Or they can transfer it over to their new employer (assuming they’re willing to take the policy on). This is known as Relevant Life Policy continuation.
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WHO RECEIVES THE MONEY?Relevant Life Plans are written in Trust. It pays a lump-sum to the employee's family if they die or are diagnosed with a terminal illness with a life expectancy of less than 12 months. Keeping the plan in trust offers the potential for an employee to plan for inheritance tax if an estate is, or is likely to be, worth more than the current inheritance tax threshold.
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IS RELEVANT LIFE COVER A P11D BENEFIT?There is no P11D benefit-in-kind to pay
"Relevant Life Cover allows employers to offer a death-in-service benefit to individual employees. It’s a tax-efficient, stand alone, single life insurance policy, set up and paid for by the employer. The proceeds are paid tax-free via a discretionary trust on death (or diagnosis of a terminal illness), for the benefit of employees' and directors' dependents".
If you're a Director who's paying for your life insurance from your personal income:
You could benefit by switching to a Relevant Life Insurance Plan provided by your limited company.
Key benefits
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Premiums paid by the company are treated as a business expense for tax purposes
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The premiums paid are not treated as a benefit in kind or otherwise taxable on the life assured
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The premiums paid do not count as part of the employees annual allowance (for pension)
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Premiums are not subject to employer or employee national insurance contributions
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Any benefit payments are free of income tax
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The death benefit does not form part of the your estate for IHT purposes
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The maximum amount of cover available is normally £10 million
Important information
Policies must be written under the appropriate discretionary trust.
The person covered must be a UK resident and an employee of a UK business.
There must be an employer/ employee relationship.
Although set up by the employer and paid for by the employer, the trustees will own and control the policy. The trustees will be the business owner(s), i.e. the employer.
A controlling director is treated as both an employee and employer.
Setting up cover
Many employers choose to set the amount of cover as a fixed sum or a multiple of salary.
Depending on age of the insured the maximum income multiple most providers allow is 25-30 times.
Some insurers allow up to £1,00,000 of cover without evidence of remuneration.
Please contact us for further information and discover how much benefit and tax savings you are entitled to.
We are authorised and regulated by the (FCA). The Financial Conduct Authority (FCA) regulates the financial services industry in the UK
