It makes good sense to have a will – but a staggering 70% of us in the UK will pass away without having valid one in place.
If you have a family then it can also make sense to take out a life insurance policy. The household bills will still need be paid should you go under the proverbial bus, so a policy can be taken out to pay a tax free lump sum to your family if this occurred.
Until recently, if your company paid your life insurance policy then this would make you liable for income tax and NIC on the amount of the premium paid. Not such a great incentive! However, the recent introduction of “Relevant Life Policies” changes all of that.
Under a Relevant Life Policy, no income tax or national insurance liabilities arise. This is because it is the employer who has taken out the plan, and the employee is not responsible for making the payments. The business can claim tax relief on the payments.
A Relevant Life Policy can cut costs – here’s an example for a higher rate taxpayer.
|Ordinary Life Policy||Relevant LifePolicy|
|Company Gross Cost||Employee’s NIC @ 1%||£17|
|Income tax @ 40%||£678|
|Employers NIC @ 12.8%||£217|
|Total gross cost||£1,912||£1,000|
|Company Net Cost||Corporation Tax relief @ 21%||-£402||-£210|
If you would like more details on how this could benefit your business, then we would be delighted to introduce you to an IFA who can explain all the nitty gritty in more detail.