Benefits of Tax Efficient Life Insurance
Have you started a new company recently? Is the size of your company is very less which means you have a few number of employees? If yes, you must be planning to offer life insurance cover to each of your employees. Now there are two ways to do that; either you can go for the conventional life insurance policies, or you can try something smarter, i.e., you can opt for a tax efficient life insurance policy.
If you apply for a traditional life insurance policy, you will need to make a contract with your employees, and you will also need to make the payments on their behalf. Basically, what happens with the conventional life policy, the employers become liable for the National Insurance Contributions as well as income tax. On the other hand, if you opt for a tax friendly life insurance, you can offer the premiums without going into any sort of contract with your employees. If you are not quite aware about this policy, here are some essential facts mentioned below –
You will be suitable for a tax efficient life policy, if –
- You are a director of a small company and want to pay life insurance coverage to your employees, and want the company to make the payments.
- You are an employee or a director with huge remuneration and enjoy a pension funds as well as other annual allowances and if you don’t want these types of benefits to be included within the lifetime allowances.
- You re the director of a small company and have a few number of employees and therefore not eligible to apply for a registered group life scheme. Well, here it needs to be mentioned that you can also use one single policy to cover all of the workers.
- You are self employed and a one-person agency, and also want to buy a life insurance policy. Well, you might wonder that in a situation like this, you could have easily opted for a traditional life cover, but the fact is that you have to pay the premiums on your own while opting for the conventional policy. On the contrary, if you go for a tax-efficient policy, the premiums are paid by the company, and that too in a tax efficient manner.
Well, now that you know for whom this type of policy is an ideal solution, let’s have a look at the key advantages of a tax efficient life insurance –
- The premiums, paid by the employer, are not considered as benefits in kind and therefore, not subject to income tax.
- One of the main advantages of this type of policy is that the benefits are not included in the lifetime allowances of the employee.
- The amount, given as premium, is not usually considered for National Insurance contribution and this is applicable both for the employer as well as employees.
- The benefits that the employers pay to his employees are not counted as a part of the employee’s annual allowances.
Category: Life Insurance
