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relevant life insurance for directors

Relevant Life Insurance could save Company Directors 50% on premiums!

Why have so few Company Directors heard of Relevant Life Insurance when they could save 50% on their monthly premiums due to the associated tax-efficiencies?

Although a relevant life policy can result in significant savings for Company Directors looking to take out life insurance, research from Legal & General has found that 63% of directors had never heard of a relevant life plan! (1) We’re hoping to change that.

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What is Relevant Life Insurance?

In terms of its function a relevant life plan is just like any other life insurance policy. The plan runs for a length of time, say until retirement age, and if you pass away during that time the insurer will pay out a lump-sum amount. Your family would then be able to use that money to help with the mortgage, childcare and funeral costs, for example.

relevant life cover calculator

The main difference between relevant life insurance and personal life insurance is that the relevant life plan is owned and paid for by your business.

It is essentially a death-in-service scheme but for just one person. A specialist ‘relevant life trust’ is also needed, which has the same function as a normal discretionary trust.

 

How can I make such big savings on my life insurance?

Tax deductible premiums…

The premiums paid by the business are usually fully tax-deductible as a trading expense, provided that the local inspector of taxes accepts that the policy premiums are ‘wholly and exclusively for the purpose of trade’.

Relevant life cover is not a P11D benefit…

Secondly, the premiums paid by the business on your behalf are not treated as a P11D benefit and will therefore not have an impact on the amount of personal income tax you pay. Additionally, there are no National Insurance implications for either the employee or the employer.

The benefit paid out by the insurer would be paid into a relevant life trust and would fall outside of your personal estate upon death, meaning that no inheritance tax would be payable on the benefit received by your family. As the plan is ‘non-registered’ with HMRC the lump-sum would also not form part of your lifetime pensions allowance.

 

Relevant life cover savings that can be made…

Paying £50 per month premium, for a Director (with a 40% marginal rate of income tax) Relevant life cover is 52% cheaper than a personal life insurance plan .

jeremycornfordportraitround

To see what you could save try our Relevant Life Insurance calculator below. For accurate savings make sure the relevant tax rates are correct for your circumstances, complete your details and see how much you could save.

Jeremy Cornford
Independent Protection Expert at Drewberry

 

Relevant Life Insurance Calculator

Calculate the tax savings you can make by choosing to take out Relevant Life Insurance and have your business pay the premiums instead of setting up a personal Life Insurance policy.
1
Your Monthly Premium
£
2
Is the premium paid from dividends ?
3
Your Highest Rate of Income Tax Your Highest Rate of Dividend Tax

Some assumptions have been made as to the relevant tax rates, please update accordingly if you are taxed at an alternative rate.

Corporation Tax Rate
Employer National Insurance Rate
Employee National Insurance Rate
4
Your First Name
5
Email Address Enter your email address for your summary report and our exclusive 'Directors guide to tax efficient insurance products' e-guide.

Your Relevant Life Tax Savings

Personal Life Cover
Relevant Life Cover
Cost to Individual
Premium
£0.00
Employee National Insurance
£0.00
IncomeDividend Tax
£0.00
Cost to Business
Premium
£0.00
Employer National Insurance
£0.00
Gross Cost
Corporation Tax
− 
Total Cost

By opting for Relevant Life Insurance over Personal Life Cover you would make savings of .

That is a saving of per month or per year.

victoriasladeportraitround

These calculators help but sometimes it doesn't beat talking to a human. If you need any support please do not hesitate to pop us a call on 01273646484.

Victoria Slade
Business Protection Expert at Drewberry

IMPORTANT NOTES

The tax treatment of Relevant Life Cover is based on the policy being wholly and exclusively for the purpose of trade. Cover can be offered to an employee as part of that employee’s remuneration package, which is competitive relative to what they could attract in the open market. The purpose of providing such a scheme must not be primarily to avoid tax.

Speaking to an expert adviser is highly recommended before entering into this type of arrangement to ensure the plan is set up correctly and you aren't falling foul of any tax rules. The team at Drewberry is here to help – just pop us a call on 01273646484.

 

Relevant life insurance restrictions

With a relevant life policy there are a number of important restrictions to adhere to, which include the following:

  • The policy must only cover death and not any disability or critical illness benefit. Premium payment protection is also not allowable;
  • It is usually only possible to cover up to 25 times your total remuneration (this can include your salary, dividends and P11D benefits);
  • The plan can only run to a maximum age of 75 years old (this is because it’s meant to align with the maximum termination age for a group life assurance scheme);
  • The plan must pay a lump-sum amount rather than an income. It is possible to take out a policy where the level of cover remains fixed (level term) or declines over time (decreasing term);
  • The plan must be payable to an individual and not to a company. A Relevant Life Trust must be used to ensure this requirement is achieved;
  • The policy must also not have any surrender value or be set-up for the purpose of tax avoidance.

If any of these criteria are not met then the advantageous tax status of these policies may be lost.

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relevant life insurance quote

Taking out relevant life cover?

Nearly all the major insurers now offer Relevant Life Insurance. As independent insurance advisers we have access to all of these products and can therefore help you obtain the most competitive premiums.

We also like to run through some details regarding your occupation, health and lifestyle in order to find you the most appropriate policy as these factors can have a significant impact on the coverage and premiums offered by insurers.

Once a suitable policy has been selected we can complete the application form for you over the telephone and help you get the relevant life trust set-up. Please call us on 02084327333 to speak to an adviser.

Notes

(1) http://www.legalandgeneral.com/library/protection/sales-aid/W13220.pdf

(2) Please note that none of the information contained here should be treated as tax advice. For tax advice please consult a certified accountant.

Compare Top 10 UK
 Protection
Insurers
 
Takes approx. 60 seconds
Type of Cover
Level of Cover
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02074425880
Our in-house Experts are here to provide FREE impartial advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at
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