Most people pay for their life insurance from their personal bank account out of post-taxed income. For company directors and owners of limited companies there is a way to reduce your costs. A type of life insurance policy called Relevant Life allows the business to pay life insurance premiums without creating a P11D (benefit in kind) tax liability. It allows you to draw more out of the business tax efficiently.
How it works
- Arrange a life insurance policy to provide the required lump sum in the event of death
- Business pays the policy premiums
- Premiums are a deductible expense for Corporation Tax
- No tax liability on your tax return
- You save tax and National Insurance costs
- The policy benefits are paid through a trust to your spouse or chosen beneficiaries
A policy providing £500,000 lump sum cover for a 40 year old, non-smoker to age 65 would cost £44 per month *
A 20% tax payer will save 31% on the costs using a Relevant Life policy. 40% tax payers would save 49% and 45% tax payers would save 53%.
How can we help
As financial planners our job is to try and ensure our clients never run out of money, whatever happens. Albeit unglamorous, life insurance is the bedrock of planning for your financial security.
We find clients tend to be over-insured having taken out several policies over the years meaning they can be paying out more than they need to. Some clients are under-insured typically due to changes in circumstances such as having more children or taking out a larger mortgage. This can mean insufficient funds are left to loved ones for them to be able to maintain the family’s standard of living.
We can speak to your insurance providers to determine exactly what you have and review what you actually need. We will aim to ensure you are fully protected and advise you on your options to reduce your costs such as by replacing existing cover with a Relevant Life policy. If you don not have any existing financial protection we can discuss with you how much cover you should have in place and, equally important, what is affordable.
Being independent we research the whole market to find the lowest cost insurance providers and we take care of all the paperwork. Our team are also experienced in removing extra costs and exclusions that have been applied to existing policies due to medical history or pastimes deemed hazardous by the insurance provider.
To get a quote or to find out more about how we can help you, call the experienced professionals at Hine Financial on 0161 438 0022.
* This is an indicative quote for a non-smoker and not guaranteed. Life insurance premiums are subject to underwriting and may be different dependent on your circumstances.
In our next blog – changes to pensions and how they affect you.