As a business owner, one of the best ways of maximising your wealth and making sure your hard work pays is to make the most of all of the allowable reliefs afforded to you by HMRC. In recent years, a certain type of arrangement called a Relevant Life Assurance Policy has been introduced which enables company directors (and other key employees) to have life assurance paid for by the business.
This used to be only be possible via Death-In-Service schemes offered by larger employers however this type of plan means that owners of smaller businesses can now also benefit.
The Tax Benefits
The tax benefits are more extensive than just allowing the cost of the cover as a business expense. Here are the main tax benefits of this type of plan:
- The company receives corporation tax relief on the cost of the premiums.
- There is no benefit-in-kind charge for the employee (unlike other insurances like Private Medical Insurance).
- The plan is written into a trust so that any proceeds that do pay out on death will be outside of the employee’s estate for inheritance tax purposes.
- Beneficiaries of the trust can be changed at any time and additional trustees can also be appointed.
This is pretty much a no-brainer for any company director who has a need for life assurance or is paying for life assurance personally at the moment.
A couple of points to note are that these plans can only include life assurance – so critical illness cover cannot be included. Also, if you have an existing plan you took out when you were a lot younger, it may not make sense to replace that with a relevant life plan.
There are many insurance companies now offering these types of plans so it is important to source the lowest possible premium and ensure that the plan is set-up correctly. We can help with this so please get in touch if you would like to find out more about how you could benefit from this type of arrangement.