Tax Efficient Life Insurance

It’s an eventuality no one really enjoys thinking about, but have you considered how your family would pay the bills in the event of your death? If you’re not already covered, taking out life insurance should probably be on your to-do list, especially if you have dependents to provide for.

You may already have a policy in place, but is it tax efficient? Traditionally, most contractors would pay for their life cover using post-tax income and dividends via their personal bank account, as it’s not normally considered a business expense.

However, Tempo’s partners at Contractor Money have created a new ‘Contractor Keyman’ life insurance product specially tailored for the needs of contractors, which is also a more tax-efficient way to provide for the future security of your family.

So how does it work? If you are a contractor trading through a limited company, premiums can be paid through your business account, with no income tax or benefit in kind payable. You should also be able to offset the cost of the premiums against your company corporation tax as a legitimate business expense.

A tax-efficient trust arrangement allows you to keep your family protected if the worst should happen, but enables you to save more tax than paying for your cover through a personal account. In addition, the payout in the event of your death should also be protected from inheritance tax.

Even if your employment status changes in the future the cover can be adapted to suit your needs until you reach the age of 75, and can also be switched to a personally funded plan if required. This could be particularly important if you develop health issues that would make you otherwise uninsurable further down the line.

Finally, you may wish to consider insuring other salaried employees this way, especially if your spouse or other family members are employed your business.

Any other questions? You can contact an independent financial advisor at Contractor Money to discuss your options on tel: 0845 066 8888 or visit: www.contractormoney.com