Tax efficient life assurance for employees
You may have thought about providing some life assurance for your employees, or a select group of employees, Directors or key contributors to your business. You may even have a group death in service scheme in force currently protecting all the staff.
A new type of life insurance has emerged in recent years that many people aren’t aware of, called Relevant life Policies.
Relevant Life Policies are a way for an employer to provide death benefits for an employee. These can be very useful when there aren’t enough employees to justify a group scheme or, where an individual requires a greater level of benefit than the group scheme provides.
As the policies are paid for by the employer, the payments are usually treated as an allowable deduction and aren’t treated as benefit in kind. The results of this are:
- Corporation Tax relief for the business on the policy premiums.
- No National Insurance liability for the employer or employee on the premium amount.
- No Income Tax liability for the employee and claim proceeds are paid out free of tax
As directors working day to day in a business are likely to qualify as employees, this can be a more tax effective way for a company director to provide life assurance benefits for his/her dependants rather than paying for it personally or it being treated as a benefit in kind.
We’ve found that by instigating or re-structuring a Company’s employee life assurance arrangements, that the overall cost has reduced by as much as 50% of the premium amount when tax relief, National Insurance and income tax mitigation are maximised as described above.