Tax relief on life insurance

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Tax relief on life insurance

Tax relief on life insurance is a brand new way to save money. The recent changes in tax laws represent a major breakthrough for life insurance policyholders, and those looking for life insurance, and a new way of saving.

A loophole in the new Finance Bill allows life insurance policies to save between 5 and 15 per cent for standard taxpayers, and as much as 30 per cent for higher taxpayers.

Are there any disadvantages to these money-saving changes?

Yes. Unfortunately, there are some strings attached. For instance, you cannot add extras to your life insurance policy. For instance, critical illness cover cannot be included, and the insured sum has to be fixed. Furthermore, you cannot have a joint policy. The insurance has to be standard, level term, single beneficiary.

Are these all the restrictions on this type of life insurance policy?

No, if you pay more than £215,000 into your pension and including your life insurance premiums per year you can’t get one of these policies. Any excess on a £1,500,000 payout on your life insurance policy, when combined with the value of your pension, will be taxed at a whopping 55%. Although these factors are unlikely to be a problem, for high net worth individuals they are certainly worth considering.

I already have a life insurance policy, could I be saving money?

Absolutely, you should be looking for a quote and looking to refresh your policy with new, money-saving terms. You can’t get tax relief on your existing life insurance policies.

How do I get tax relief on my life insurance?

The life insurance company automatically collects tax relief. This means that they pass down a reduced premium to you. For higher rate taxpayers, it will be necessary to claim the extra tax relief through your self-assessment tax return. Once you have told the taxman about the premiums, they will continue to provide the relief.

Will this situation change?

It is rare for a tax relief change to be applied retrospectively, so it is unlikely that the tax relief will be removed.

Is this the same as pension term insurance?

Pension term insurance, life insurance with tax relief, and life protection with tax relief all basically mean the same thing.

Where can I find this new type of life insurance policy?

Although many major insurance companies and even high-street financial services providers are beginning to offer these policies, you should speak to an expert before taking one out.

Please use our Mortgage Enquiry Form and one of our experts will contact you for further assistance. Alternatively, you can give us a call on 0845 108 0505.

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