So, you have started up a new company and you have less than five employees. In a situation like this, you have two ways to arrange a life insurance policy -
a) General and
b) Tax efficient life insurance.
In case of the normal policies, you need to make a contract with your employees and you will be making the payments on behalf of them. What happens with this type of policy is that the employees become liable for both income tax and National Insurance contributions. On the contrary, if you go for tax-saving life insurance, you can make the payments without making any payment contract with your employees. Here are certain essential facts about this type of cover; please read on if you want to know more about this.
You are suitable for a tax-efficient life insurance policies, if -
- You are the director of a company and want the company to pay for your life coverage and you also want to save on corporation taxes.
- You have a very small business with a limited number of employees and they are not eligible enough for a group insurance policy. You can also cover all of your workers with one single policy.
- You are a director or an employee with a hefty remuneration and enjoy a big pension fund and if you don’t want these benefits to be included in your lifetime allowances.
- You are a one-person agency and want to buy a life insurance policy. If you do it on your own, you have to pay the premium on your own, whereas if you purchase a tax-efficient policy, the money is spent by the company, and, that too, in a tax-exempt manner.
Well, having mentioned people for whom this type of cover is an ideal solution, now let us look at the key benefits of tax efficient life insurance:
a) The benefit of this cover is not included in an employee’s lifetime pension allowances.
b) The premiums that the employer pays are not usually considered as a benefit in kind for the employee, and so, are not subject to income tax.
c) The benefits that are paid by the employer are not considered as a part of the employee’s annual allowance.
d) The amount of the premium is not usually taken into consideration for National Insurance contributions and this is applicable both for the employer and the employee.
© 2013, Alan Starc. All rights reserved.