Protecting you and your staff can be tax deductible

28 June 2016

Employees are the life blood of any organisation, no more so than in a small business. Yet many smaller companies often struggle to offer the sort of benefits package that larger ones can, such as planning for old age and/or unexpected events.

Business owners can both financially protect themselves and key employees, at the same time as making substantial tax savings, with a Relevant Life Insurance Policy. Rather than individually paying for their personal life insurance, company directors could opt for a relevant life insurance policy and have their company pays for the premiums.

Life Cover for small businesses

Co-Director of Absolute Wealth Management, financial adviser, Pete McBride knows this problem only too well having run his own business for over 13 years. “As a small business owner you are only too aware of the need to take precautions to protect your family in the event of your death.”

Most company directors have a personal life insurance policy and pay the premiums from their personal income. In contrast, if a company has a Relevant Life Insurance policy, the company pays the premiums so they are not treated as a P11D benefit, but as a trading expense, making them tax deductible.

As Pete notes, “On average company directors paying 40% personal income tax could make a saving up of to 52% on their life insurance premiums if they opted for cover under a Relevant Life Insurance Policy. For example, if you currently pay £50 a month for life insurance, switching to a relevant life cover could save £7,800 over a 25-year term.”

How can I take out this cover?

At Absolute Wealth we work with a whole range of providers, notably Royal London, Legal & General and Aviva, to offer cover for Relevant Life Insurance policies.  We can offer cover for you and anyone directly employed by the company, all we need to decide is the amount of life cover needed. With a Relevant Life Insurance policy this can be 15 times your total remuneration, including salary, dividends, P11D Benefits, which we believe provides more than adequate cover.

“One of the biggest incentives for having relevant life cover versus personal life insurance is that it is automatically written in trust so in the event of death any money received remains outside of your estate,” concludes Pete. “Since it does not form part of your estate, it is not eligible for inheritance tax. We would recommend personal life assurance is written in trust in the majority of cases.”

If you have any personal financial issues relating to this article and require further advice, then please contact Pete McBride or Simon Harnaman on 0117 907 1965 or info@absolutewm.co.uk.

Categories: life protection, Tax