If you’re a company director who pays for their own life insurance, or a high-earning employee whose company provides a ‘death in service’ benefit, you should probably consider a Relevant Life plan instead.

 

What is a relevant life plan?

In short, it’s a tax-efficient life insurance policy with extra benefits. It’s a plan that’s paid for by a company, as a tax-deductible business expense, but which pays out to the director or employee rather than the business.

Why is it tax-efficient?

Many company directors will have personal life insurance, and almost all of them will be paying for it personally, through pre-taxed income, or their company will be paying for it thus leaving them with a P11D benefit-in-kind.

A Relevant Life plan is paid for by the company (as a tax-deductible expense) rather than by the individual, yet it isn’t a benefit in kind.

To put this into context, a higher-rate taxpayer can save 49 per cent by paying for their personal life insurance via a relevant life plan, and for a basic-rate tax payer the saving is around 36 per cent”

Who should consider Relevant Life cover?

Directors wishing to provide themselves with a tax-efficient life insurance policy

Directors wishing to provide their own individual ‘death in service’ benefits without taking out a scheme for all employees

High-earning employees who want a ‘death in service’ plan that does not form part of their ‘lifetime allowance’ (£1million)

Anyone who doesn’t want their policy to be treated as a P11D benefit in kind

Anyone who wants as much cover as 25 x their annual salary (depending on provider and medical underwriting)

How does a Relevant Life plan offer savings over a traditional life insurance policy?

The following is based on an employee who wants £500 a month worth of life cover. The employee pays 40% tax at a company with a 20% corporation tax rate. The employee would pay 2% NI and the company will pay 13.8% NI.

If you’d like to see an illustration of relevant life cover using your own circumstances, please get in touch on 0844 809 4897 for a no obligation conversation, or fill out the form here and we’ll call you back.

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