Accounting Blog

Tax Efficient Life Insurance Cover

At Holcombe Financial Services we work with business owners to create bespoke financial plans that suit their personal and business goals. One area we do a lot of work on is tax efficiency.

One area we cover is protection and life assurance for businesses and business owners. Many business owners are unaware that they could pay for their own life cover through the company and have this treated as a business expense so it saves on tax. Without planning you will most likely find that these premiums do not benefit from tax efficiency. If the company pays the premiums from the company bank account without any planning in place, then these premiums are not tax deductible simply as a result of that.

Taking advice on your protection arrangements could prove a tax-efficient way of providing valuable life cover for your employees or for yourself, as a company director. The net result of this type of planning is:

As the company pays the policy premiums, they are usually considered as an allowable deduction and are not treated as a benefit in kind so:

• the policy premiums are treated as a business expense and are likely to be an allowable deduction against Corporation Tax
• the policy premiums do not form part of an individual’s annual allowance for pension contributions
• the life cover benefits do not form part of an individual’s lifetime allowance for pension savings
• there is no liability for the employer or employee to National Insurance on the policy premiums
• there is no liability for the employee/you, to Income Tax on the policy premiums
• life cover benefits are paid tax free to the nominated beneficiaries.

Tax treatment depends on your individual circumstances and may change in the future. Advice is therefore recommended.

There are particular policies that are designed for individual members who may need more life cover than is provided by the company’s death in service scheme or, where the number of employees is too low for a company group scheme.

As the benefits of certain protection policies don’t form part of your lifetime allowance, taking out death in service benefits with advice could be a tax efficient way of providing valuable life cover.

Jeremy Bostock DipPFS BA (Hons)

Holcombe Financial Services Ltd
4 Market Chambers
Lancashire BL0 9AJ

T +44 (0)1204 238500
F +44 (0)1204 238400
M +44 (0)7894 584835
Twitter: @holcombefs


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