Financial Planning - Protecting
your family with tax-efficient life cover.
When working as an employee, for an employer, you often have life insurance through what is
known as a Group Death in Service Scheme. This scheme will normally provide a lump sum of a multiple of salary
to a spouse or dependent on death while you are employed. It may also provide for a pension as well. This
is paid for by the employer and is exempt from being taxed as a benefit in kind.
On leaving employment this protection
is stopped which means you have to provide for this cover personally if you wish to continue with the same level
of protection. This will be out of taxed income.
A tax efficient option to meet this protection cover, if you have your own limited company, is called a Relevant
Life Policy (RLP). RLP’s are very tax efficient as the cost is treated as an allowable business expense against
corporate profits meaning you are not paying it from your own income after tax and crucially it is not a benefit in
kind either. The amount insured can be based on a multiple of remuneration including dividends.
HMRC have rules when setting a policy up and the most important is the amount insured must be multiple of
remuneration, usually maximum of 10 times. It cannot be a fixed amount which bears no resemblance to remuneration
being paid. If a claim is paid while the policy is in existence the benefits are paid tax free to the company to be
distributed tax free under a discretionary trust to the beneficiaries outlined at policy inception. If you wish to
provide additional life cover to a spouse or dependent to provide for loss of income on death in service a RLP
should definitely be considered.
Please note that, as my client, you are
entitled to a free of charge financial planning review with a fully
qualified Independent Financial Advisor –