When you’re working as a Contractor and running your own company it makes sense to pay for as many legitimate businesses expenses as you can through it. Most people pay for life insurance out of their own pocket, unless they work for a company that offers group life schemes or death in service benefit.
The good news is that now your company can offer you life insurance too. When you are running your own Ltd company as a Contractor, you can use a product called Relevant Life Insurance to pay for your life insurance on business expenses.
Here are the 3 main benefits of using this method of life insurance for Contractors who run their own Ltd company:
1: Pay for your life insurance as a business expense
When running a company as a Contractor, if you can pay for something through your company and get tax relief on it then why wouldn’t you? As Relevant Life Insurance is a business product it can be classed as a business expense; which means you can put it through your books and save tax in the process.
2: Make significant tax savings
Let’s use the example of Chris, a UK based Contractor. He’s on a 20% tax rate and he’s paying £60 a month for his life insurance premium over a term of 25 years. Doing the maths, this would add up to a total of £18,000 over the full period of the term.
By switching to a Relevant Life policy, paid for through his company and making a 36% tax saving he’d save £6,480. If he was paying more, or was on a higher tax rate, the savings would be even greater.
The 36% saving is because he saves on corporation tax, income tax and NI contributions by paying for the insurance through the company. Not a bad saving for just restructuring something that he pays for anyway.
3: No tax surprises on the lump sum
A lot of people don’t realise it, but traditional life insurance can be subject to inheritance tax. Which might leave your loved ones with less than you intended.
Relevant Life Insurance needs to be set-up using a trust, which means that when set-up correctly there will be no inheritance tax due on the lump sum paid. So you can have the peace of mind that your beneficiaries will receive the full amount you intended should the policy need to pay out.
Taking the next step
The benefits of Relevant Life cover are obvious. Just bear in mind that, as with any cover, factors can vary significantly depending on your personal circumstances and the policy provider you are currently using.
It is very important that you select a policy that is right for you and provides the cover you would like for your loved ones. You’ll need an experienced advisor, who understands your circumstances and who also understands the facilities available to Contractors.
That's where we can help.