If you are a director of a limited company a Relevant Life Plan offers an extremely cost-effective way to arrange Life Insurance cover. Not only does it let you protect your loved ones should you pass away, but it also lets you protect your employees.
This type of cover allows even smaller businesses who don’t have enough employees to be able to offer a group life scheme, to offer their employees comprehensive financial protection, whilst benefitting from the tax efficiencies generally enjoyed by larger companies.
A Relevant Life Plan taken out by your company could allow you to achieve double the cover at a similar cost or halve the price of an existing policy through tax efficiencies*, when compared to taking out a personal policy.
An employer can arrange individual death-in-service benefits on the life of an employee, including directors. The plan pays a tax-free lump sum benefit payable to the employee’s family if the person covered dies or is diagnosed with a terminal illness, while employed during the term of the policy.
You can also choose to add significant illness cover to the plan to offer peace of mind to your employees that should they be unable to work if they became seriously ill, they wouldn’t have to worry about the financial implications they may face.
Offering such cover to your employees can demonstrate how much you care about their well-being and provides a tool to aid retention and recruitment of employees, allowing smaller businesses to compete with the attractive employee incentive packages normally only offered by larger employers.
Uniquely tailored to your specific requirements, the cost of these plans to an employer can work out much less than the cost to an employee arranging an equivalent Personal Life policy. All of which is achieved through tax efficiencies, with combined corporation tax and personal tax savings typically ranging from 26% to 50%+ depending on individual circumstances.
Key benefits of a Relevant Life Plan:
- An allowable deduction against your corporation tax bill (saving 19% or more)
- In addition, a personal tax saving compared to dividends (Basic rate payers 8.75%*, Higher rate 33.75%* or Additional rate 39.35%*)
- Non-taxable benefit – no additional personal tax for the employee to pay
- Tax-free pay out to your loved ones completely exempt from inheritance tax
- Enhances your benefit package to reward and attract employees
- Cover all or some of your employees – cover available on an individual person basis
- Optional significant illness cover add-on
- Some policies are transferable, if you sell or close your limited company either into your own name or directly into the new company name. (Limitations can apply i.e. time frames for moving into the new company etc additionally, tax benefits are lost whilst the policy is in a personal name).
Higher rate taxpayer – company profit between £50k and £250k
Example policy for male aged 45, providing £1,000,000 cover up until retirement age of 68.
| 22/23 tax year | 23/24 tax year | |||
|---|---|---|---|---|
| Policy - assume £100 per month | £100.00 | £100.00 | ||
| Corporation tax saving | 19.00% | -£19.00 | 26.50% | -£26.50 |
| £81.00 | £73.50 | |||
| Tax saving from not extracting dividend | 33.75% | -£27.34 | 33.75% | -£24.81 |
| Effective cost of policy | £53.66 | £48.69 | ||
| Discount compared to buying personal policy* | 46.34% | 51.31% | ||
Basic rate taxpayer – company profit below £50k
| 22/23 tax year | 23/24 tax year | |||
|---|---|---|---|---|
| Policy - assume £100 per month | £100.00 | £100.00 | ||
| Corporation tax saving | 19.00% | -£19.00 | 19.00% | -£19.00 |
| £81.00 | £81.00 | |||
| Tax saving from not extracting dividend | 8.75% | -£7.09 | 8.75% | -£7.09 |
| Effective cost of policy | £73.91 | £73.91 | ||
| Discount compared to buying personal policy* | 26.09% | 26.09% | ||
*Figures depend on individual circumstances and are used for illustrative purposes only, tax rates are based on Government policies issued at the time of publication - 24.11.22
Want to know more?
Our team of expert and friendly planners can explain how a Relevant Life Plan could benefit you. Please call 0330 441 2244, complete our enquiry form or email [email protected] to book a FREE consultation to discuss your needs.