Mrs Orange had worked for a large nationwide firm of architects for many years, having successfully built up her reputation in the industry, she took the bold step to leave her senior position and set up her own firm, Stephenson Architects Ltd

Whilst establishing her own firm has brought many financial advantages to Mrs Orange, she was conscious that she no longer has the benefit of the death in service cover provided by her previous employer. With a husband and two young children, Mrs Orange wanted to ensure that if the worst were to happen they would be protected financially.

Mrs Orange contacted Boolers, having been recommended their services by her accountant, who after having taken the time to thoroughly understand her financial position, needs and objectives recommended a relevant life plan.

The life insurance plan was written under the appropriate trust for Mrs Orange’s husband and paid for by her limited company. Taking the cover in this way, as opposed to paying for a personal life insurance policy from her earnings, was highly tax efficient, saving her employee national insurance contributions, income tax, employer national insurance contributions and reducing her corporation tax bill.

Mrs Orange takes home £60,000 from the business a year as income with no dividends taken. The relevant life cover has a monthly premium of £80.

Relevant Life Plan Personal Life Insurance Plan
Mrs Orange
Premium £80
Employee NI Contribution £2.76
Employee Income Tax £55.17
Gross Earnings Required £137.93
Stephenson Architects Ltd Stephenson Architects Ltd
Premium £80 Employee NI Contribution £19.03
Corporation Tax Relief £16 Corporation Tax Relief £31.39
Total Cost – Tax Adjusted £64 Total Cost – Tax Adjusted £125.57

The above is based on taxation bands 2016/2017 and assumes no other income sources.

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This case study is for illustrative purposes only and should not be construed as advice or guidance. It is based on our understanding of current taxation, law and practice (August 2016), which is subject to change.