Relevant Life Insurance
A relevant life policy is available to employees, including salaried directors, setup by the company to pay tax free lump sum in the unfortunate event of death.
It is a tax efficient life assurance policy that is written in trust.
Premiums are paid for by the employer and usually treated by HMRC as a business expense.
It can be used as part of an employment package to incentivise staff, at a relatively low cost.
Who might benefit?
- Limited company salaried directors
- Businesses too small for group life scheme
- High earning employees
- Company may benefit as used to attract and retain staff
Amount of cover
The maximum amount of cover available depends on the employee’s age and remuneration and is reduced if the employee already has any family protection cover in place.
- 17-29 years old Up to 35x remuneration
- 30-39 years old Up to 30x remuneration
- 40-49 years old Up to 25x remuneration
- 50-59 years old Up to 20x remuneration
- 60+ Up to 15x remuneration
What make this policy so good for company directors
- You make tax savings compared with paying for it personally
- Payments are normally classed as a business expense
- Keeping the plan in trust offers the potential to plan for inheritance tax if your estate is worth more than the current inheritance tax threshold
For small business
As an owner-operator of a small business, you may work full-time and employs two others. You cannot access a full-group life scheme but can have access to a relevant life policy.
This chart explains how the costs work
|PREMIUM||£100 per month||£70 per month||£30 per month|
|Employee National insurance||none||none||none|
|Total company gross cost||£100 per month||£70 per month||£30 per month|
|Less corporation tax (assuming 20%)||£20 per month||£14 per month||£6 per month|
|Tax adjusted cost||£80 per month||£56 per month||£24 per month|
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