Relevant Life Plan
What is a relevant life plan?
Relevant life plans (RLP) are a way of providing death-in-service benefits on an individual basis no matter how small your business is.
What are the benefits?
- Although the company makes the payments, they’re not normally treated as a benefit in kind, so they’re not included in your income tax assessments. For a higher rate taxpayer, this could be a significant saving.
- Unlike a registered group scheme, the benefit won’t form part of your annual or lifetime pension allowance.
- These payments are likely to be treated as an allowable expense for the company in calculating its tax liability.
Who would benefit from a relevant life plan?
- Small businesses that do not have enough eligible employees to warrant a group life scheme
- High-earning employees or directors who have substantial pension funds and don’t want their benefits to form part of their lifetime allowance
- Employees of any type of business
- Members of group life schemes who want to top up their benefits
RLPs are not suitable for self-employed or equity partners.
How a relevant life plan can cut tax on company costs
| Ordinary Life Policy | Relevant Life Policy | ||
| Payment | £1000 | £1000 | |
| Company Gross Cost | Employee NI @ 2%
Income Tax @ 40% Employer NI @ 13.8% Total Gross Cost per annum |
£34
£690 £238 £1,962 |
£1,000 |
| Corporation Tax relief | Corporation Tax relief @ 19% | £373 | £190* |
| Net Cost | £1,589 | £810* | |
| Saving | £779 |
*Assumes that corporation tax relief at 19% has been granted under the ‘wholly and exclusively’ rules. In both cases we have assumed a payment of £1,000 each year for the life cover on an employee who is paying income tax at 40% and employee’s National Insurance at 2% on the top end of income. We have also assumed that the employer is paying corporation tax at the rate of 19% and will pay employer’s National Insurance at the contracted in rate of 13.8%.
We’ve based the information in our example on our understanding of tax law and practice as at August 2017, so it may change. The tax treatment of all protection plans depend on individual circumstances so may change.