INSURANCE FOR BUSINESS | EMPLOYEE PROTECTION

Relevant Life Insurance

Relevant life plans are similar to most other types of life policies, except that they aim to provide a tax efficient benefit provided by an employer for an employee.

Policy premiums paid for by the business are an allowable expense for the employer. It is therefore not seen as a benefit in kind, so the employee does not pay Income Tax or National Insurance on premiums. The cover will pay out a lump sum if the employee dies whilst employed, during the policy term.

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Protecting Your Employees and Their Families

If you own a business, there’s a smarter way to buy life cover for yourself and your key employees. Relevant life Insurance is an individual death in service policy that allows an employer to provide tax efficient life cover for employees.

A relevant life policy pays out a tax-free lump sum if your employee dies or is diagnosed with a terminal illness during the policy term. The main purpose is to give financial protection to your employees, spouses, partner or dependants.

Protecting Your Employees and Their Families

If you own a business, there’s a smarter way to buy life cover for yourself and your key employees. Relevant life Insurance is an individual death in service policy that allows an employer to provide tax efficient life cover for employees.

A relevant life policy pays out a tax-free lump sum if your employee dies or is diagnosed with a terminal illness during the policy term. The main purpose is to give financial protection to your employees, spouses, partner or dependants.

Who Might Want To Take Out Relevant Life Cover?

  • Small businesses – wanting to offer life insurance to their key people
  • High-earning employees – who may exceed their personal pension lifetime allowance. Registered group life schemes are included in pension legislation, meaning any proceeds are added to the employees pension fund and may cause them to exceed their maximum lifetime allowance.
  • Members of group life schemes – who want to top up their benefits. Some group life schemes are restrictive.

Unlike Group Schemes, HM Revenue and Customs consider the payment of premiums to be a business expense (so you don’t have to pay national insurance contributions)

You can choose:
– the amount of cover.
– the term.
– whether the cover is level or inflation-linked.

This will then be written in Trust, meaning that if the employee dies, the claim is paid free from Inheritance tax, to their beneficiaries.

Relevant life cover is arranged on an individual basis, with their company as the policy owner and the employee as the person insured. It is available to salaried employees who live permanently in the UK.

The aim is to provide a tax efficient benefit provided by an employer for an employee. There are a number of advantages to arranging relevant life insurance including:

  • The policy premiums paid for by the business are not normally assessable on the employee as a benefit in kind so they are not subject to income tax. This means for a higher-rate taxpayer, the company director could make a saving of up to 49% by paying for their personal insurance via a relevant life plan.
  • For a basic rate tax payer, the saving is still significant at around 36%.
  • The policy premiums paid for by the business are not normally assessable for employer or employee National Insurance contributions.

The policy premiums may also be treated as an allowable expense for the employer in calculating their tax liability provided that the local inspector of taxes is satisfied they qualify under the ‘wholly and exclusively’ rules.

A saving of nearly 50%.

Life policy Relevant life policy
Annual payment
Employee tax
NI at 2%
£1000

£34

£1000

£0

Income tax at 40%
Employee Tax
NI at 13.8%
£690

£238

£0

£0

Corporation tax at 19% -£373 -£190
TOTAL COST £1589 £810

For more information and a free quote from a dedicated Protection Consultant, please call Stacey on 01270 758057 or click link below.

A relevant life policy is a very cost-effective way to offer life cover to employees if your business is not eligible for a group life assurance scheme. We help individuals every day to protect their family in a tax efficient way.

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R.K. Henshall © 2021

R K Henshall & Co Ltd are Independent Intermediaries and are authorised and regulated by the Financial Conduct Authority. Directors: J.R. Henshall B.A.(Hons) ACII Cert CII (FS), A.J.Simpson ACII, T.R.Dredge DIP CII, A.Brown FCCA. Director/Company Secretary R.K. Henshall ACII. Registered No. 1285024

R K Henshall are very proud to support Lupus UK. Lupus UK is a charity very close to our hearts. Unfortunately, Nita Davies who had been a stalwart of our company from it’s very beginning lost her battle against this terrible illness in 2013. Lupus UK is the only National Charity which supports people with the immune system illness. (Registered charity nos. 1051610, SC039682) Click here to read more about Lupus UK.