If you are like most of us, your wallet may have taken a big hit this Christmas, but a new year always provides an opportunity for a fresh start – starting with getting your finances in order. One handy tip to save money we want to let you in on is switching your regular Life Insurance policy to Relevant Life Insurance.
If you’re asking ‘what is Relevant Life Insurance and how is it different from normal Life Insurance,’ don’t worry- you’re not the first. Relevant Life Insurance operates the same way as regular Life Insurance, paying out a lump sum to your chosen beneficiaries (usually your family) if anything were to happen to you. The difference is that Relevant Life Insurance is tax efficient and specifically designed for Contractors and Directors of limited companies.
If you own a limited company you can pay for your Life Insurance through your business as a company expense rather than out of your own pocket and taxed salary. In doing so, you could save money in a number of ways. Firstly, as it is claimed as a business expense, you can receive a tax-relief on the amount paid. Secondly, as the policy premium is paid for through your company profits, it will reduce your corporation tax bill. In addition, the policy is not seen as a ‘benefit-in-kind’ and therefore does not need to be included as a part of your P11D form, nor will you be subject to any national insurance contributions.
Another great benefit of Relevant Life Insurance is that your pension will remain untouched. The premium does not count towards your annual pension allowance limit and therefore Contractors with a large pension pot are still able to benefit from tax relief on pension contributions while enjoying the peace of mind that comes from knowing your family are protected if anything happens to you.
In this way, the policy works very similarly to a death-in-service benefit that regular 9-5 employees receive. It’s also worth bearing in mind that, just as regular Life Insurance, the cost of the premium is assessed based on your age, health and lifestyle, as well as how much cover you want. It is important to consider what you need the payout to cover, such as the remaining Mortgage, bills, outstanding debts and your family’s standard living costs.
If the tax saving tip sounds of interest to you, then you’d be wise to also consider paying for your Relevant Life Insurance policy annually, rather than monthly, as you could save some extra pounds. It’s estimated that monthly premiums can increase by up to 4% over annual premiums, yet the cover is no different.
Another benefit of paying for your Life Insurance in one annual payment is that it makes ‘doing the books’ easier. As it is a one-off payment, it will be one less direct debit you have to worry about.
To get your new year off to a good start with this tax-saving tip, request advice from our trusted Life Insurance partners.