Relevant Life Cover is a popular benefit within businesses looking to provide high performing or highly valued senior members of staff extra incentives.

It’s typically used by larger companies for senior employees like directors, or for smaller companies that wouldn’t warrant a group life insurance policy.

There are a number of benefits both to you as the business and your employees to offering Relevant Life Cover to some staff.

However the main benefit for both of you, is it qualifies for a number of tax deductible benefits, making it a highly tax efficient benefit to offer employees and your business.

In this blog, we look at some of the tax benefits to using Relevant Life Cover in your business.

Relevant Life Cover, income tax and national insurance

Relevant Life Cover premiums usually don’t count towards an employee’s income, and they also don’t usually get assessed as a benefit in kind (which requires an employee to complete a P11D form).

Because of this, it means your employee won’t have to pay income tax on the monthly premiums, or any initial payments to set up the life cover.

For you as the employer, it also means you won’t have to pay the national insurance contributions either.

These tax breaks also extend to any proceeds for the policy in the event of a successful claim.

It means that any payouts from the Relevant Life Cover, or terminal illness cover won’t be liable for income tax, national insurance or even capital gains tax.

Relevant Life Cover as an allowable expense

From a business perspective, Relevant Life Cover is a good benefit to offer because the premiums are usually classed as an allowable expense, meaning you can offset the costs in your tax returns.

You’ll be able to do this as long as the insurance premiums are paid fully and exclusively for the purpose of the business.

This is one of the reasons Relevant Life Cover is such a popular benefit.

Relevant Life Cover and inheritance tax

Because payouts made through Relevant Life Cover don’t form part of the employee’s estate, it typically means the payments won’t be liable for inheritance tax.

The reason for this is that Relevant Life Cover is usually set up as a trust and held that way until any payments are needed.

We’ve got more information about why it’s best to set up Relevant Life Cover as a trust in this blog.

Having said that, there might be times when a payout could fall into a bracket that makes it liable for inheritance tax payments.

We’ve got more detail on that particular topic in this blog.

Start getting the benefits of Relevant Life Cover with help from Rigby Financial

If you think Relevant Life Cover could be a good fit for your business then get in touch with us today.

Our team of experts have years of experience helping hundreds of businesses find the right life cover policies for them and their employees.

We’ll work with you to understand what you need out of a life cover plan for your employees and then help you find the right level of Relevant Life Cover.

Get in touch with us today.

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