27 Apr 2024

Tax Free Life Insurance

Relevant Life Insurance Plans are similar to term life cover and a pay out a lump sum on death,

The difference is they aim to offer a tax efficient way for an employer to arrange life cover benefits for an employee.

As such, Relevant Life Plans are usually viewed as an allowable business expense by HMRC. This means all premiums and paid benefits qualify for full Income Tax relief, National Insurance relief and
Corporation Tax relief.

The premiums could be reduced by up to 49% compared to a typical life policy if you are a higher rate taxpayer. For a basic rate taxpayer this figure could be up to 40%.

Who Can Take Out a Relevant Life Insurance Policy?

To be eligible for a Relevant Life Plan, the person to be covered must be an employee of the business. This can include directors on PAYE.

Unfortunately, Relevant Life Plans are not available for sole traders, equity partners of a partnership or equity members of a Limited Liability Partnership.

Relevant life insurance It’s a Single Life Policy, which means each plan covers one person – you, for example. There’s no option to include joint cover, such as for you and your partner, in the same policy.

Some providers will allow a multi plan discount if you take two polices under one plan.

What is the Cover Limits with Relevant Life?

There’s no minimum amount of cover. The maximum amount of cover available usually depends on the employee’s age and benefits package (as decided by you, the employer) and is reduced if the employee already has any family protection cover in place:

• Age 17 to 29: up to 25 x package
• Age 30 to 39: up to 20 x package
• Age 40 to 59: up to 15 x package
• Age 60 to 73: up to 10 x package

The total amount of cover that can be applied for must not exceed £10 million. For the purposes of a Relevant Life Insurance, the benefits package includes salary, bonuses, benefits in kind and regular dividends from shares in the employer’s company or a company within the employer’s group of companies.

Can you Have Serious Illness Cover with a Relevant Life Plan?

Currently there is one provider who have agreed with HMRC that you can have serious illness cover as part of a relevant life insurance. The key difference with this plan and a personal critical illness plan is the illness definitions. If you would like to find out more on relevant life insurance with critical illness cover please contact us for more details.

Do you want Advice on Relevant Life Insurance ?

After you have read the relevant life insurance information if you would like Relevant Life Insurance Advice, please complete our life insurance inquiry form and we will contact you to discuss your Relevant life cover and protection needs.

You may also be interested in:

• Pension Term Assurance Explained
• Critical Illness Protection Explained
• Income Protection Explained
• Accident Sickness Unemployment Explained
• Life Insurance Advice