Before setting up cover many employers wonder how Group Life Insurance is taxed, so it’s a good question to bring up!
In brief, it’s a fairly simple tax-efficient benefit that provides a tax free cash lump sum should an employee pass away.
With Group Life Insurance you as the employer pay for your workers’ life cover. Usually, Business Life Insurance is eligible for corporation tax relief.
For employees, the good news is that generally Group Life Insurance is not a taxable benefit in kind (P11D Benefit). This means there is no income tax to pay on the cover.
Also, Group Life cover is usually written into trust, which means the payout falls outside of the deceased’s estate for inheritance tax purposes. As a result, the beneficiaries won’t have to pay any inheritance tax on Death in Service payouts, either.