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Tax Relief on Life Assurance20th October 2008
As a result of charges in legislation which became effective from 6th April 2006 it is now simpler to obtain Tax Relief on premiums for some life assurance products.
If you haven taken out a life assurance policy in the last seven years, it may be possible to transfer the cover to a Life Assurance with Tax Relief policy and obtain Tax Relief of at least 22% and possibly 40% (depending on your income tax rate) on the premium.
If your policy meets the following criteria you could be eligible for a policy which enables you to maintain the current sum assured, term and gross premium of your existing life assurance but with Tax Relief on the premium:
- Your existing life cover was taken out within the last 7 years and has at least 10 years until expiry
- The premium is greater than £5 per month or £60 per annum
- Confirm that the total sum assured on the plan(s) you wish to replace is £500,000 or less providing it was taken out within the last 5 years or is £200,000 or less if taken out within the last 5 to 7 years.
- You were accepted at standard premium rates.
- Your state of health has not changed since the existing application. This is important as you will need to sign a declaration for the replacement policy.
- You are eligible for Tax Relief
- The existing policy is a level term assurance or mortgage protection policy with no critical illness benefit, waiver of premium, or increase option.
If you fulfil these criteria the procedure for affecting the replacement policy involves only the completion of a declaration.
Even if you do not meet all of the above criteria you may be able to benefit form Life Assurance with Tax Relief by taking out a new policy. However this would be at current premium rates based in your age at present. The net premium may still be less than you are paying at present.
If you are a basic tax payer or a non tax payer you could reduce your current life assurance cost by up to 22%. If you are a higher rate tax payer you could reduce your cost by up to 40%.
If you would like to know more about this please contact Neville Manning at our Practice.