Protect your business and improve life cover at the same time
According to a firm of Chartered Accountants in Stockport, IN Accountancy, many business owners don’t realise that ‘relevant life’ cover could be better than their current life protection policy because of the way it can protect a business and be tax efficient as well.
A ‘relevant life’ policy could protect you and other directors in your business, with cover that won’t adversely affect your pension savings (as a group life scheme could) and is tax efficient from both personal income tax and business tax perspectives. What’s more, this type of protection is likely to be more competitively-priced than your current arrangements.
What is a ‘relevant life’ plan?
‘Relevant life’ plans (RLPs) are an alternative to setting up a registered group life scheme in a business but still provide a lump sum if an employee dies or is diagnosed with a terminal illness. RLPs are very useful for small businesses that do not have enough eligible or relevant employees (usually 10 or more) to warrant a group life scheme.
Protect your lifetime allowance
RLPs are good for high-earning individuals who have substantial pension funds, as they do not form part of ‘death in service’ benefits. This means employees can still contribute to their pension pots without affecting their annual or ‘lifetime allowance’. This is a key benefit when you think that payments made from pension funds over £1m, can be taxed at up to 55%!
Benefit from tax efficient cover
Policies can be a tax-efficient addition to other pension investments, such as, membership of a group scheme, or can provide a stand-alone pension for individuals in the absence of other provision.
Personal and business tax savings
As RLPs are set up through a business, they are not assessed as a ‘benefit in kind’ so they are not subject to income tax. The premiums may also be treated as an allowable expense for the employer in calculating their tax liability including corporation tax relief. There are also savings for both employer and employee national insurance contributions.
How do ‘relevant life’ policies work?
The big advantage to RLPs is that they can be tailored to an individual employee, something which is rarely possible within group life schemes. They need to be set up through a trust, only life cover can be provided and benefits are paid in a lump sum.
If you want to find out more, contact Sarah Harkness at IN Accountancy on 0161 456 9666.
