A relevant life plan is a tax-efficient way for a business to provide death-in-service benefits for an employee or director — combining valuable cover with some useful tax advantages.
Key features
Tax-efficient for the employer
Premiums are usually an allowable business expense, reducing the company's tax bill.
No impact on pension allowances
Unlike registered group schemes, a relevant life plan doesn't affect the employer's pension contributions or allowances.
Tax-efficient for high earners
Premiums aren't usually treated as a taxable benefit for the employee, and the plan doesn't count towards annual or lifetime pension allowances.
Inheritance Tax benefits
Paid through a discretionary trust, the benefit is usually free of Inheritance Tax and reaches the intended family members and dependents.
Who it suits
- Small businesses that don't qualify for traditional group life schemes but still want to offer death-in-service cover.
- Directors and high earners wanting to boost their cover without affecting pension allowances.
- People already in a group scheme who want to top up beyond its limits.
Eligibility
To qualify for the tax advantages, certain conditions apply:
- The cover must be set up before the employee reaches 75.
- The policy must provide death benefits only.
- Benefits must be paid through a discretionary trust.
- Beneficiaries are generally limited to the employee's family and dependents.
HMRC practice and tax law depend on individual circumstances and can change, so it's worth taking advice to tailor a plan to your business.
Important — please note
This article is general guidance, not personal advice. Business protection combines insurance, legal agreements and tax considerations that depend on your specific circumstances, so professional advice is essential. Tax treatment depends on individual circumstances and may change in the future.
For a recommendation based on your own situation, please get in touch.