Most, if not all companies offer benefits to their employees in return for their hard work. While some may offer a company car or accommodation, others provide their employees with life insurance.
However, while these benefits are incredibly helpful for many people, some of them are taxable. Therefore, if you receive any benefits from your employer that are not part of your normal salary or wage, it’s your responsibility to check if you have to report it so that it can be taxed.
But do you have to pay tax on life insurance? In this article, we answer the question, ‘is a company life insurance policy a benefit in kind?’ to find out.
What is companies life insurance, and why do companies offer it?
Put simply, life insurance is a type of insurance that pays out a sum of money if you die. People usually choose to take this out if they have a family or have other dependents that rely on their income. Life insurance can protect your loved ones if you die unexpectedly. To apply for life insurance, you usually have to have a health check. The healthier you are, the less money you will have to pay into your policy.
Although life insurance can be a great way to protect your family if the worst happens, it can be an expensive monthly payment. Fortunately for some, many businesses offer companies life insurance policies to help their employees’ families if the worst happens.
There are a number of reasons why companies may offer life insurance to their employees. Firstly, this perk can mean that more people will want to work for the company, and positions can be filled more quickly. More than this, it can help encourage employees’ financial wellness, can protect their loved ones and can provide peace of mind.
What are benefits in kind?
Benefits in kind are a type of benefit that companies give their employees which aren’t included in their salaries or wages.
In the UK, not all company benefits are the same. Some are not taxed, while others are. Therefore, it is important to know whether you have to report your benefits in kind to HMRC.
To report a benefit in kind, you need to fill in a P11D form. However, you only have to report any if they effectively increase your salary. This is because they may increase your national insurance contribution, although these contributions will be paid by the company.
Is a company life insurance policy a benefit in kind?
Although company life insurance can be considered a benefit, it is not treated as a benefit in kind that you need to report on your P11D form. This is because life insurance has no direct impact on your income, as it is paid into a policy directly by your employee. If you pass away, your chosen beneficiaries will receive the insurance that the company has paid for. Usually, beneficiaries do not have to pay any tax on any life insurance money they receive.
In conclusion, companies life insurance is not a benefit in kind that you need to report on your P11D form.
Considering company life insurance?
If you’re a business owner, you want to do everything you can to ensure that your employees are happy at your workplace. You also want to easily be able to attract new talent so that job roles are not left empty.
Here are some reasons why you should consider giving your employees life insurance:
It can help protect their loved ones: In the event that one of your employee’s passes away, their loved ones may struggle to make ends meet. Life insurance can make a huge difference in helping families get back on their feet.
It gives them peace of mind: An employee who is worrying about their family is less likely to be productive. Providing them with the security of life insurance gives them peace of mind and keeps them focused while they’re at work.
It can enhance company culture: If you have a great talent pool at your company, you want to do everything you can to ensure that they stay. By providing life insurance and any relevant life plans, your retention rate should improve.
Whether you are looking for business life insurance, companies life insurance or self-employed income protection insurance, check out the available policies today at WIS Business Protection.