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Being director of a company puts you in an advantageous position in a way that your company can provide and pay for your life insurance called the relevant life insurance.
Thoughts become depressing in a scenario where your loved once were to remain unprotected if you weren’t around anymore to pay for the rent or mortgage, bills, school fees, groceries and other expenses.
What is relevant life insurance then?
This is the life insurance policy set up and paid for by your own company and your life as a director is assured under the policy. The policy is set up in a trust and in the event of the director’s death the policy pays out the benefit into the trust for the beneficiaries. The beneficiaries are your loved once.
How is this tax efficient
HMRC normally treats this policy more favourably as compared to where the policy is taken out personally. The tax efficiencies are as follows:
- The policy premium paid by the company are treated as ‘allowable business expense’. This reduces the net profits before tax of the company leading to lower corporation tax bill for the company.
- Normally, benefits paid by a company to the director are subject to benefit and kind rules. Therefore, the employee has to pay Income Tax and National Insurance Contributions. But for this policy, the benefits/premiums are not treated as a benefit-in-kind. So no Income Tax or National Insurance is payable.
- Being written in a trust, any lump sum is paid into the trust for the beneficiaries will not be subject to Income Tax. Normally, no Inheritance Tax will be due as well. This makes it very attractive and tax efficient policy.
The above is a short summary to give you an indication only of the possibilities. Please
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