Relevant Life cover is a specific type of Life insurance policy that can be set up through a LTD company. The director(‘s) can choose to put this in place for themselves or set it up for their employees, essentially creating a Death in Service Benefit. The policy is owned by the company and paid for by the company from pre-tax profits. It is essential that the plan is then written into trust so that the benefits are delivered to the employees next of kin or chosen beneficiaries. There are several Benefits for doing this:
- As the payments are classed as an allowable business expense then there is usually an instant income tax & National insurance saving as the director doesn’t pay for the premiums from their personal, already taxed income.
- Corporation tax-relief – The LTD company can also claim back corporation tax relief on the premiums. Whilst corporation tax has fluctuated over the last few years and is currently calculated on a tier system, this can be a saving of anywhere from 19-26%.
- Usually, the plan offers cheaper premiums than standard Life cover on a like for like basis.
- If the Director decides to leave the business or sell it, they can take the policy with them and just pay if from their personal account.
- Most providers offer online trust applications so that the policy can be written into trust immediately ensuring the plan complies with regulations from the outset.
Its important these plans are set up correctly so have a chat with one of our Advisers if you are a Director of a LTD company and save money whilst protecting your families future.