Tax Matters with Chris Annis, director LB Group
- Credit: Archant
Many families have Life Cover, or Life Assurance, as this is an invaluable way of providing for the family left behind after the death of a main earner.
If you trade via a Limited Company then there is a way that you can reduce the cost of these Life Assurance premiums and let the taxman help pay for some of it!
“Relevant Life” policies are a way of providing death-in-service benefits to an individual no matter how small the company is.
The company makes the premium payments instead of the individual and what’s more, the payments are not treated as a benefit in kind, and so will not be included as part of the individual’s taxable income.
This already equates to a significant saving if the individual is a higher rate taxpayer.
From a company point of view, the payments of these premiums for Relevant Life are treated as an allowable expense so there is an added Corporation Tax saving.
In summary such policies are suitable for small businesses where there are not enough employees to warrant a group life scheme and in particular high earning Directors who are paying for their own Life Insurance.
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WHAT ABOUT NON BUSINESS OWNERS?
If you are not a company, then have you considered whether your own Life Assurance plans are safe from the taxman?
Writing your life policies ‘into trust’ is an option that should be considered for two main reasons;
The first and biggest advantage is that any proceeds from life assurance payouts paid “into trust” fall outside your estate and are therefore not subject to inheritance tax. Therefore, writing the life policy “into trust” may save 40% of the policy monies being paid to the taxman.
Secondly, there will be no need for a Grant of Probate before the proceeds are paid out.
By writing the life policy “into trust” the Insurance Company will only need sight of the Death Certificate to make a payment and typically, the trust policies are then paid out within 2 weeks of death, whereas if probate is needed this takes much longer.
It is never too late to take out Relevant Life policies or rewrite personal policies “into trust”.
If you have any queries regarding the above please feel free to contact LB Group on 01473 359720 or email Ipswich@lbgroupltd.com.
Please note the above does not constitute financial advice and LB Group cannot be held responsible for any errors or omissions.