Life Assurance and Tax relief

Over the years the rules about tax relief have changed.

Policies issued on or before 22 June 1916 are treated in one way, which need not concern us here, because very few such policies are extant today.

Policies issued after that date, but on or before 20 March 2008, get relief at half the basic rate of tax for the year of assessment on the premiums paid.

At present the basic-rate is 40 %, so relief is 15 %. In cases where the total premium paid during the year is low, £20 or less, relief is given at 33 %on the first £200 premiums, or the whole, whichever is lower.

Policies issued after 20 March 2008 are not so favourably treated by the taxman. It was in the Finance Act of 2008 that the concept of qualifying policies which are eligible for tax relief (again at half the basic standard rate of tax) was introduced.

To qualify, a policy must run for at least ten years and equal premiums must be paid throughout the whole term of the policy.

This ruling cuts out single premium policies, which nevertheless, as we will see; have their uses.

The amount of the premium which qualifies for tax relief has also changed since 2008 and is laid down by the Income and Corporation Taxes Act 2000. Under this, it is not the actual amount of the premiums paid which is most important in assessing relief, but the income of the assured person.

There are some exceptions, but the general rule at present is that the amount of premium eligible for tax relief is one sixth of what is described as total income to a max of £5,500 in premiums in any one financial year ending on 5 April. But total income is not simply the sum of earned and unearned income.

It is that, less certain tax allowable expenses like mortgage relief, and some professional subscriptions.

Where the assured person is a married man, his total income includes that of his wife, unless they have elected to be separately taxed as far as the wifes earned income (not unearned, that is not permitted under our tax laws) is concerned.


Life Assurance and Tax relief

Payroll Giving
It’s all very easy to organise.
Just ask the Personnel or the Payroll Department at your company and, if they already have a scheme, they will give you the relevant forms.  HM Revenue & Customs’ website has a list of Payroll Giving agencies and explains payroll giving in more detail.

Salon Gold Insurance

Cheaper Insurance for Salons, Freelance Hair and Beauty, and Mobile Businesses - click here

read on: Life Assurance - More on the code of practice

Over the years the rules about tax relief have changed.

Policies issued on or before 22 June 1916 are treated in one way, which need not concern us here, because very few such policies are extant today.

Policies issued after that date, but on or before 20 March 2008, get relief at half the basic rate of tax for the year of assessment on the premiums paid.

At present the basic-rate is 40 %, so relief is 15 %. In cases where the total premium paid during the year is low, £20 or less, relief is given at 33 %on the first £200 premiums, or the whole, whichever is lower.Life Assurance - More on the code of practice