We’re often asked about tax deductible limited company expenses, so today’s post will be of interest if you’re seeking a little-known way to reduce your tax bill.
Up to now you may have taken out a life assurance policy that is funded from your own personal taxed income. Safehands are pleased to offer a new product – Relevant Life – where the premium is paid for by your business instead, offering a number of money saving benefits.
A Relevant Life Assurance policy provides a tax effective means to provide life cover as a possible replacement for a normal life assurance policy paid for from a personal account, so it makes sense to consider a Relevant Life plan as part of your future investment, both for yourself and your most valued employees
One of the greatest savings is that you don’t need to pay any national insurance or income tax on the premiums but still get the benefits of corporation tax relief, subject to meeting the ‘wholly and exclusively for the purposes of the business’ test.
How a Relevant Life policy works
The policy is designed to pay a lump sum if the employee dies or is diagnosed with a terminal illness whilst employed during the length of the policy. If you are a small business owner, this is particularly suitable for you, as it is suited to individual life cover, including your own. If you are a director or employee paying higher-rate tax, you can save up to forty-nine per cent with a Relevant Life plan. Even basic tax-rate payers still make a worthwhile saving of thirty-six per cent.
Tax deductible limited company expenses
Up until recently, a business owner may have offered a group life insurance policy to employees only if it had ten or more employees, thus qualifying for group insurance rates. Although group schemes are still available, Relevant Life policies give greater scope for the small limited company, partnership or limited liability partnership.
More about Relevant Life
Relevant life policies are written on a single life basis on the life of an employee, allowing any business to take out this cover. The sum assured benefit won’t form part of the employee’s pension’s lifetime allowance and the premiums paid won’t impact the employee’s annual allowance. Further, the premiums paid by the employer on a relevant life policy won’t constitute a benefit in kind as the policy will be providing retirement (by way of terminal illness cover) or death benefits. These premiums won’t therefore be subject to income tax.