As we head into a new tax year, many small business owners will be looking for ways to be more tax efficient.
Many small business owners receive excellent advice from accounting professionals, however many don’t take advantage of relevant life insurance.
This means that they will be paying life insurance premiums out of their personal income rather than as a benefit from their business as an allowable cost.
What Is Relevant Life Insurance?
If you’re a business owner who is employed by your business, relevant life cover can provide a tax efficient alternative to purchasing standard insurance saving you up to 20% on the premiums.
In short, the premiums are paid by the business rather than the individual and are allowable as a business expense. They are also not treated as a P11D benefit so have no implication on personal tax.
Traditionally, these policies would only have covered death. However, due to innovation in the sector, a leading insurer now offers cover which is very similar to critical illness cover (significant illness cover).
This essentially means that as a business owner, you can fully protect yourself against death and significant illness, reduce your corporation tax bill and increase your personal disposable income without paying any more personal tax.
Policies can also be provided as a benefit to employees within the business. This can be very tax efficient for the business and provide valued employees with a benefit that doesn’t affect their tax taxable pay.
It’s important to note that there are stipulations around relevant life cover policies which need to be met so independent financial advice is recommended.
However, if you are a business owner who believes in tax efficiency and financial protection, relevant life insurance should be high on the agenda as we enter a new tax year.