What are the advantages of a relevant life policy?

Let the Taxman help pay for your life cover

Arranging life cover for yourself can now be treated as a legitimate business arrangement and, with your company paying the premiums, there is also the potential of reducing your company’s Corporation Tax liability.

Some of the advantages of relevant life policies are:

  • Tax free benefits to your dependents
  • No national insurance implications
  • The benefits won’t form part of the employee’s lifetime pension allowance.
  • The payments made won’t form part of the employee’s annual allowance.
  • The payments employers make aren’t subject to income tax because they’re not normally assessable on the employee as a benefit in kind.
  • These payments can be treated as an allowable expense for the employer in calculating their tax liability, as long as the local inspector of taxes is satisfied they qualify under the ‘wholly and exclusively’ rules.
  • In most cases the benefits are paid free of inheritance tax – provided they’re payable through a discretionary trust.
  • The use of a discretionary trust will provide added protection by ensuring the money is passed to your intended beneficiaries, allowing control of the money, and keeping the money within the family. Some examples are; the trust assets will not form part of a beneficiary’s estate for the purposes of divorce should your widow or widower subsequently remarry, and the funds could be delayed or withheld if a child beneficiary develops a substance abuse problem and any money paid to them would only worsen the situation.

More on relevant life policies…

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