This is one of many conversations we’ve been having about Relevant Life Policies:
Small Business Owner: Err…um…Relevant Life…I’ve never heard of it!
EP: They’ve been around since 2006, but the uptake has been very small compared to the number of people who could benefit! We’re on a mission to spread the word as it’s not often the taxman helps small business owners.
Small Business Owner: Well, what is it then?
EP: Relevant Life insurance is a death-in-service benefit that small company directors can take out for themselves as well as individual employees. The policy is written in trust from the outset so it pays out a lump sum to the employee or their beneficiaries if they die whilst employed during the policy term.
SBO: What’s the difference between Relevant Life and a regular life policy?
EP: For the same cover, you pay less!! You can save up to 49% on your premiums if you are a higher rate tax payer and 36% if you’re a basic rate tax-payer * Your business claims tax relief on the premiums so reduces its corporation tax liability, it’s not treated as a benefit in kind and the premiums are paid by the company, so from pre-tax income.
SBO: What is the benefit to my employees?
EP: Most policies are portable if your employee moves to a new job – they won’t necessarily have to cancel their existing policy or take out new cover. This is particularly advantageous if the employee is significantly older or has had any health issues since taking out the policy originally. If the worst happens, as the policy is set up in Trust, payouts are free of Income Tax and Inheritance Tax Liability and won’t count towards the employee’s lifetime pension allowance.
SBO: There must some be downsides?
EP: There are things to think about. Relevant life policies can’t be used for business protection (relevant life policies protect the individual). Relevant Life policies have no surrender value.
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