9th December 2019
Here’s 6 facts about Relevant Life Insurance that are useful to know as a Contractor or limited company Director looking to protect their loved ones financial security. If you’re unaware of what Relevant Life Insurance is it might be helpful to read this overview first.
Unlike regular Life Insurance, this policy is taken out by your limited company on your behalf, rather than by yourself directly. Therefore, rather than you having to pay for the policy out of your own pocket and post tax income, the monthly premiums are paid for by your Limited Company as a business expense. However, just like regular Life Insurance, it will be your beneficiaries that receive the payout if you were to pass away.
Relevant Life Insurance is one of the few benefits that do not have to be declared on your P11D at the end of the tax year, as it is not seen as a benefit-in-kind. The policy will be considered as a company expense and therefore you won’t lose any of your tax-free allowances and your company will enjoy the corporation tax relief on the premiums.
Not only is Relevant Life Insurance tax-efficient when paid for by your company but it is also tax-efficient for your family to receive a payout. If you place your Life Insurance into a trust, the payout will not form part of your estate, meaning your beneficiaries could benefit from reducing the amount of inheritance tax due.
You can accumulate up to £1,055,000 into your pension pot before have to start paying tax. This is your lifetime allowance for tax year 2019/20 but it’s important to keep in mind that this is likely to increase in line with inflation at the end of the current tax year. Unlike lump sum payments from a pension scheme, payments made from Relevant Life Insurance are not included in your pension lifetime allowance.
Relevant Life Insurance stays intact for as long as your Limited Company keeps up the payments and the terms and conditions of the policy are not breached. If you change your mind, there is no surrender value.
Because Relevant Life Insurance is a legitimate business expense, your monthly premiums are deductible against your company’s corporation tax. This means that you can ensure greater tax efficiency by simply paying for your Life Insurance through your company.Your business can claim Corporation Tax Relief on the premiums.
Find out more by watching the video below:
Relevant Life Insurance has many benefits if you’re a Contractor or company Director, but it’s important to ensure that it is the right policy for yourself and your loved ones. If you think you would benefit from Relevant Life Insurance, get in touch with one of our expert advisers.
All content is accurate at the time of publication
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