It offers a cost-effective way for an employer to arrange Relevant Life Cover on the life of an employee, with the benefit payable to the employee’s family or financial dependants. This life cover should be tax-efficient for employers and employees, as long as it meets certain legislative requirements. These Relevant Life Cover policies can be taken out if you have an LTD company or are an employee of one, including company directors.
Many LTD company directors do not realise they are able to take out relevant life insurance policies through the LTD company and potentially be subject to tax relief.
For example, Mr Smith pays £50 per month for his personal life insurance policy. Due to his tax bracket, his accountant mentions that he’s really paying £69.81* per month for the policy due to being subject to 20% employee tax rate. Mr Smith takes out a relevant life cover through the business and his accountant confirms he is able to benefit from the corporation tax relief. The potential 20% relief means he would only be paying £40.80* per month for the same policy. This change in Relevant Life Insurance would save Mr Smith over £348* per year and over £6,962.40* over 20 years.
This is for illustrative purposely only as Weystone Financial cannot advise on your tax affairs.
*All figures are representative of the Royal London Relevant Life Calculations as per https://adviser.royallondon.com/protection/tools/during-your-client-meeting/relevant-life-calculator/ based on 25/04/2022.