Close form

Tax efficient life cover for directors and employees

23 March 2021
Mark Friend
Reducing Tax, Payroll, People

Being protected in the event of the unexpected is something all company directors should prepare for. We have all heard of tragic stories of individuals unexpectedly losing their lives, and whilst it is rare it does happen and for many this can leave a huge financial hole for their loved ones.

For many years we have been highlighting to clients the advantages of death in services benefits. So what actually is a ‘Death in Service’ policy?

Many people confuse death in service benefit with life insurance. They are however very different.

In essence, death in service is an occupational benefit provided by the employer. The employer pays regular contributions to the scheme on behalf of its directors or employees and if they die while on the payroll a nominated beneficiary will receive a lump sum, either a fixed amount or based on a multiple of the employee’s earnings to help them financially.

In contrast, life insurance is a separate policy that you arrange yourself and is designed to pay out a cash sum of your choosing if you die during the length of the policy.

The advantage of a death in service policy is three fold:

  1. The premiums are tax deductible for the employer.
  2. The premiums are not deemed a benefit in kind for tax purposes so there is no tax liability for the employee.
  3. Any pay-out is tax free for the beneficiaries.

So if you are a company director with a young family or have dependents it is a benefit definitely worth considering. You can take the benefit irrespective of the salary you pay yourself. Although there is no legal requirement for employers to provide a death in service benefit it can be an attractive benefit to your employees and is a great way to show your employees that you care about them and their families.

If you want to find out more about death in service benefit we would recommend you speak to your financial advisor or if you are a client of Friend & Grant contact your client manager and we will introduce you to one of our approved financial advisors.

The content in this blog is correct as at 23/03/2021. See terms and conditions.

Similar articles

boats
29 April 2022

Tax trap! Is your estate worth between £2 and £3 million? If so you could lose valuable allowances

We deal with many affluent clients and it is interesting how attitudes to inheritance tax can vary significantly, even between people with similar levels of wealth. Some say that they have paid taxes all their lives – on their income, asset sales, property purchases – and begrudge paying the treasury even one more pound in inheritance tax when they pass. Others feel that it will be someone else’s problem, so why should they worry. Most people are somewhere in the middle.

Probate
22 April 2022

Is Probate Difficult to do Yourself?

This is a question that gets asked a lot. The simple answer is – it depends! The preparation of papers to obtain the grant of probate or grant of representation is the responsibility of the executors if there is a valid will, or if the deceased died intestate it will be the responsibility of the…

graph
6 April 2022

Growing your business without the financials!

In order to make big profits you need to know what are the key numbers in your business. Well it’s not the cashflow, budget, profit and loss or bank balance……we are talking about non-financial figures that help the business to grow……CONVERSION RATES!

Our 3 step risk-free guarantee puts your mind at rest and keeps us on our toes!

FIND OUT MORE
byrant house at night office

Book Your Discovery Meeting

Are you hungry for success? If you run a small to medium size business and you want to grow your sales, increase profitability and pay less tax then you have come to the right place.