It may sound strange but there is a new type of life insurance called relevant life insurance available in the U.K. If you are a director of a company and offering relevant life insurance benefits or death in service benefits to your employees, you can qualify for substantial tax benefits. Directors and high-income employees can also benefit from these policies. Despite the fact that companies are making payments for the premiums, they are not typically subject to income tax on the employee since it is not considered a benefit in kind. As a result, it turns out to generate considerable savings, especially for taxpayers in a high tax bracket. This benefit is not classified as a component of the pension fund or the yearly allowance of the particular employee. Similar to a death in service policy, a relevant life policy will allow owners of companies to offer life insurance to their employees in a tax efficient way.
Tax benefits offered by Relevant Life Insurance
- The benefit offered to the employee or director is not subject to income tax
- Premiums paid for the employee is not assessed for tax since it is not a benefit in kind
- The policy carries potential tax breaks on the premiums paid by the employer
- Premiums don’t come under the jurisdiction of the National Insurance payments
- Most of the time, benefits are disbursed without inheritance tax
- Benefits are not taken into consideration when the lifetime allowance for pension is calculated
- Premiums are not taken into account for the yearly pension allowance of the employees
- Benefits are disbursed via what is known as a discretionary trust or charitable organization. In this way, probate delay is averted and inheritance tax is not imposed.
- Employers are allowed to subtract premiums by showing it as a company cost
It is worth mentioning that this cover helps employers get tax concessions in the following areas:
- Employee National Insurance – @2%
- Corporation tax – @20%
- Employer National Insurance – @13.8%
Many insurance companies have specifically designed coverage to offer multiple tax benefits when it is a matter of your small business enterprise or organization. Initially, you obtain the normal benefits related to bearing a life policy, given that the policy offers a lump sum to the beneficiaries or dependents in the unfortunate event of a death when the policy is operational.
Next, the tax benefit feature of this policy is increasingly garnering popularity. As a matter of fact, the premiums for this cover are not assessed for income tax. In addition, the expenditure is considered as a legal outlay for the objective of tax calculation. However, it is better that you don’t only depend on assumptions. Consulting an accountant or talking to a tax consultant for the right suggestions is always helpful while you are contemplating a relevant life cover plan. It will make sure you have a proper idea about what you should look for and the extent of tax benefit you will get from it.
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