What is Relevant Life Insurance?

Relevant life insurance is a tax efficient way of a company providing life insurance for its employees, including directors of limited companies. Put simply, rather than the directors paying for their life insurance from their net salaries, with monies already taxed at a company and personal level, the limited company can pay for the premiums from its gross income.

What is the tax treatment of these policies?

Premiums are treated as an allowable business expense by HMRC. With Corporation tax relief available, and no additional income tax or NI to pay, the savings to be made by writing insurance in this manner are huge. A basic rate tax payer will save 40% of the cost, with the saving rising to almost 50% for a higher rate tax payer. The company will own and pay for the policy, and it is written into a trust to ensure that the benefits of the policy are paid out to those who you wish it to go to, without delay.

How a relevant life policy can cut company costs
Premium Ordinary life cover Relevant Life Policy
£1,000 £1,000
Company gross cost Employee’s National Insurance contributions at 2% £34 Nil
Income tax @ 40% £690 Nil
Employer’s National Insurance contributions at 13.8% £238 Nil
Total gross cost £1962 £1,000
Company net cost Corporation tax relief at 20% £392 £200*
Net cost £1,570 £800*

Source: Royal London *Assumes that corporation tax relief at 20% has been granted under the ‘wholly and exclusively’ rules. In both cases we’ve assumed a payment of £1,000 each year for the life cover on an employee who’s paying income tax at 40% and employee’s National Insurance at 2% on the top end of income. We’ve also assumed that the employer is paying corporation tax at the small profits rate of 20% and will pay employer’s National Insurance at the contracted-in rate of 13.8%

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With advances in medical care more and more people are now surviving illnesses once thought to be fatal.

Protection insurance is designed to help when the things we hope will never happen to us, do!

Protecting your future is important and Income Protection can protect your income and make sure that money is there when you need it most.

This cover can give you the peace of mind of knowing that in the event of redundancy or illness your mortgage payments will be made.

Your home is probably the largest single financial commitment you will make in your lifetime, so protecting it is so important.

You insure your car, your home, and your valuables – isn’t your health the most important asset of your life?

Relevant life insurance is a tax efficient way of a company providing life insurance for its employees, including directors of limited companies.

Directors’ shareholder protection is insurance that is specifically designed to ensure that should one the shareholding directors die or be diagnosed with a terminal illness the remaining shareholders will have access to sufficient capital to buy the deceased’s shares from his/her estate.

Key person insurance helps safeguard a business against the financial effects of the death or critical illness of a key member of staff



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