Many large companies provide a benefits package for all employees that includes some form of life cover. However, those who own a company or are self-employed may not have this kind of protection in place.
Is life insurance tax deductible?
Yes, in many cases life insurance premiums can be treated as a business expense with HMRC. This means that life insurance costs can be deductible through your tax return if you own a limited company or are self-employed.
Can company directors pay for life insurance through the company?
A major benefit of being a company owner or company director is being able to obtain life cover tax-efficiently through the company.
Company directors who pay for life insurance through the company instead of through their own income could save thousands of pounds over the duration of the policy.
They can do this by setting up a Relevant Life Policy which is paid for by the company on behalf of the director. The company can claim back corporation tax relief and no Employer National Insurance is due. The employee also does not pay income tax or National Insurance.
To a higher rate taxpayer, a £200 per month life insurance policy will cost £392 of gross pay after accounting for tax and National Insurance.
Please note that a Relevant Life Policy does not include critical illness or income protection benefits.
Speak to an expert about life insurance cover
To maximise the tax-efficiency of a life insurance policy, it is important that the costs are deduced correctly as if the calculations are done wrong, it can cause tax implications in the future.
Speak to a financial adviser at Four Wealth Management to find out the tax rules and what policies you could take out.
Book a no-obligation meeting now or phone 0117 973 0500
The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.