What is a Relevant Life Plan?

A Relevant Life Plan is a tax-efficient life insurance policy designed for businesses to provide individual life cover for employees, including salaried directors. This policy offers death-in-service benefits, ensuring that employees’ families are financially supported in case of the employee’s death or terminal illness while employed. The premiums paid by the business are generally treated as an allowable business expense by HMRC, offering significant tax relief.

Why Consider a Relevant Life Plan?

• Tax Efficiency: Premiums can be treated as a business expense, reducing Corporation Tax.
• No Additional Taxes: Employees do not face additional income tax or National Insurance charges.
• Inheritance Tax Benefits: The payout is typically outside the employee’s estate, reducing potential Inheritance Tax liabilities.

Who Can Take Out a Relevant Life Plan?

Any UK business can take out a Relevant Life Plan for its employees, including salaried directors. However, sole traders, equity partners of a partnership, or members of a Limited Liability Partnership are not eligible.

How to Set Up a Relevant Life Plan

1. Choose a Provider: Select a reputable insurance provider.
2. Policy Setup: The policy is typically written under a Discretionary Trust, with the employee’s family or dependents as beneficiaries.
3. Regular Premiums: The business pays regular premiums based on the level of cover.
4. Claim Process: In case of the employee’s death or terminal illness, a claim is made by the trustees.

Options When an Employee Leaves

If an employee leaves the company, there are two options:

• The new employer can continue the policy, maintaining its tax efficiency.
• The employee can continue the policy personally, although it will lose its relevant life status.

How Relevant Life Plans Make a Difference

By providing tax-efficient life cover, Relevant Life Plans:

• Help retain and attract skilled employees by offering competitive benefits.
• Provide financial security to employees’ families.
• Save businesses money compared to traditional life insurance policies.

Example of Cost Savings

Additional Benefits Included in Relevant Life Plans

Relevant Life Plans often include additional benefits at no extra cost:

• Accidental Death Benefit: Coverage during the application underwriting process.
• Policy Adjustments: Options to increase coverage without further underwriting under certain conditions, such as marriage, birth of a child, or increase in salary.

Tax Benefits and Trusts

Writing the policy in trust ensures:

• Payouts are tax-efficient and timely.
• Avoidance of probate and intestacy laws.
• Potential reduction of Inheritance Tax liability.

Adjusting Your Policy for Better Coverage

Businesses can adjust the level of cover based on changes in the employee’s life, such as promotions or life events, ensuring the policy remains relevant and comprehensive.

Ensuring Continuation of Coverage

If an employee changes jobs, they can continue their policy without new medical evaluations, maintaining their life cover uninterrupted.

Frequently Asked Questions about Relevant Life Plans

What is a Relevant Life Plan?

A tax-efficient life insurance policy for employees.

Who is eligible for a Relevant Life Plan?

Employees of UK businesses, including salaried directors.

What are the tax benefits?

Premiums are treated as a business expense, reducing Corporation Tax.

What happens if an employee leaves?

The policy can be continued by the new employer or personally by the employee, though it may lose tax-efficient status.