Relevant Life Insurance policies provide life cover to the dependants of the policyholder, with funds paid via a discretionary trust. When you look for a Relevant Life cover quote, the premiums are paid for by the contractor’s company, rather than the employee. Therefore, this saves tax for you as the contractor.
You can take out a policy to protect you (the director). What’s more, you can also extend cover to your staff, and this may include your spouse. It is key that you are aware that this is on the basis you receive a salary from your company.
Three other policies that are specifically for contractors and are worth considering are:
- Contractor insurances in general
- Contractor Mortgage
- Critical illness
- Income protection insurance for contractors
Now, back to Relevant Life Insurance. Whether you are a business owner or a contractor, a Relevant Life policy offers very tax-efficient life insurance.
How much can you save with Relevant Life Insurance?
Let us now see how the cost of your contractor life insurance policy shifts when you obtain a Relevant Life cover quote. It moves from your pocket to your company expenses and the taxman.
For example –
Let us assume that you own your own company. You pay £100 a month and choose to pay for Contractor Life Insurance out of your pocket. It will cost your business more than it should. To begin with, if you are a 40% taxpayer, you need to consider you have already paid tax on the £100 in the form of income tax and employer and employee NI contributions. In fact, after 19% Corporation Tax (CT) relief, the net cost to your business works out at £158.93 per month.
Instead, by having a Relevant Life Insurance policy for your contractor life insurance, you do not pay any NI contributions or income tax on the premiums. However, you still receive a 19% CT relief. In turn, this makes the net cost only £81 per month.
That is a huge saving of £77.93 a month. This saving equates to £935.16 over the year.
There are great savings if you obtain a Relevant Life cover quote and pay through your own company
Not only does a Relevant Life Insurance policy offer great savings and special advantages to directors of small businesses and contractors looking for contractor life insurance cover, but it makes sure that your family is protected when you are no longer around.
While the life cover is personal to you, the policy counts as a genuine business expense. Therefore, it is tax-deductible. Let us now learn more about a Relevant Life Policy’s benefits:
- You will immediately save tax by the business paying the contractor life insurance cover premium.
- HMRC will not treat it as a benefit in kind; you will not need to report the premium as a P11D benefit.
- Premiums are not subject to NI payments for the employer or employee.
- Your business can claim CT Tax Relief on the premiums.
- The benefit is payable tax-free.
- The benefit does not count towards your lifetime allowance for pension purposes.
Relevant Life Insurance ought to be a consideration if you are a contractor and are looking for contractor life insurance. There are great savings if you pay for this through your company.
Therefore, if you would like to request a relevant life cover quote on tax efficient life insurance please make an enquiry with Broadbench. You can book yourself an appointment with one of their expert Contractor protection advisers. Please note, the link above has currently expired and a new one will be replacing this very shortly.
Link to Contractor Advice UK group on LinkedIn https://www.linkedin.com/groups/4660081/