Every business, particularly small businesses, have at least one employee who is vital to on going success of that company. This is particularly true for Company Directors working through their own limited company. But what happens to that business or employee if they die in service or are diagnosed with a terminal illness? It’s not something any of us want to think about, but protecting your business and your employees is crucial.
Until a few years ago, it was only possible for a limited company to take out group insurance for a minimum of 10 employees. For many small businesses, who don’t have anywhere near 10 employees, this was not an option. And while the majority of company directors have some sort of life insurance, most of them are paying for it personally or paying it through their company and receiving a P11D penalty for it.
But the introduction of Relevant Life Insurance has changed all of that. Not only can Relevant life insurance be set up for one or more employees, but there are great savings to be made in insuring through the business. The policy premiums paid for through the business are not usually subject to income tax, nor NI contributions from either the employer or employee. In addition, the policy premiums will normally be allowed as an expense for the employer.
Overall, RLI allows a higher-rate tax payer to save up to 49% on insurance costs, while a basic-rate tax payer can still save around 36%. This comes from a combination of Corporation Tax and personal tax savings.
As with anything to do with HMRC, there are strict rules, so do check with us before you commit to anything.
This simple infographic illustrates some of the main points.