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Hints & Tips

Lymm Village

Tax Hints and Tips

Lymm Village

Free hints and tips about tax and accountancy from Lymm Tax

Life insurance

Do you have life insurance? Who pays the premiums?

Most of us have life insurance especially if we have dependents and most of us pay this ourselves from our own personal bank accounts.

If you operate through your own company (or indeed if you work for someone else) there is a much cheaper way to pay: get the business to do it.

Say your premium is £30 a month, you typically need to earn £52 to leave you with enough money after tax and national insurance to pay out £30.

If the company pays the premiums for you, the company gets tax relief (typically at 20%) for the premiums. So each £30 costs it only £24 net. The same can be said of lots of other benefits in kind which the company may provide for you but the beauty of life insurance is that it is not taxed like other benefits in kind. If a company were to pay private medical for you of £30 a month, the company would get the same tax relief as above, reducing the net cost for the company to £24. However, you would be taxed on the value of the medical insurance, so this isn’t a particularly attractive benefit. The beauty of getting the company to pay your life insurance is that, although this is a tax deductible cost for the company, it is not treated as a benefit in kind, so you don’t have to pay any tax yourself.

Ask your IFA about “relevant person insurance”