A Relevant Life Plan is one of the most cost-efficient way of offering life cover to you or your employees. It’s tax efficient and, in most cases, premiums will be treated by HMRC as an allowable business expense. With Corporation Tax relief available, and no additional income tax or NI to pay, it makes good business sense to provide this protection for both you and your employees.
A Relevant Life Plan offers some additional advantages, most notably tax efficiency. While the life cover is personal to you and your employees, the policy counts as a business expense, meaning that it is tax deductible. Furthermore, it does not count towards annual or lifetime pensions allowances meaning more money can be put towards the pension. It is also a cost-effective way to offer life cover to your employees if your business is not eligible for a group life scheme.
To be eligible for a Relevant Life Plan, the person covered must be an employee of a UK business, which can include company directors who are salaried. Unfortunately, Relevant Life Plans are not available for sole traders, equity partners of a partnership or members of a Limited Liability Partnership.
The policy must provide death benefits, it cannot only provide critical illness cover. The sum assured for the individual, although generous, must not exceed 15 to 25 times their salary (the multiple varies depending on age). The policy is written under its own trust document, keeping the plan outside of an individual’s estate which may help with Inheritance Tax planning and delays due to probate. A Relevant Life Plan can provide very effective savings for directors, compared to the cost of personally paying for a plan.