Over the course of the festive season we’ll be bringing you an advent calendar’s worth of tax and financial tips. Some of them might even be a little Christmassy! It’s 19 December so there are only five more tips left, starting with…
Tax free health and life insurance?
Most health and life plans, if paid through your company, will be a benefit in kind. This means that if you are covered by such plans then you will pay tax at your marginal rate – either 20%, 40% or 45% – on the cost of the premium.
In addition, the company will pay Class 1A NICs at a rate of 13.8%. Benefits in kind also need declaring to HMRC on P11D forms, which are an added complication and, if you want an accountant to prepare and submit them, cost. So, it quickly becomes apparent that health and life cover might as well be paid personally to avoid all of these headaches.
There are, however, a couple of insurance products out there that don’t fall within the benefit in kind regime: relevant life insurance and executive income protection. Premiums on both of these are tax deductible in the company and you won’t pay tax on them either.
Executive income protection is there to pay out if you can’t work for some reason (serious stuff, not a cold). This is particularly recommended if you have business partners or if you or your family would seriously struggle financially if you were to lose your ability to generate income for more than three months.
Beware: insurance is a regulated activity so you should always take advice from a qualified IFA. We know one if you need an introduction!
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