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If so you could be paying an unnecessary tax penalty. If you pay for this cover from your own bank account you will be paying from post-tax income, and if you are paying from the business account you will probably be taxed on the payment as if it were income.

Larger companies can avoid this by introducing ‘group death in service cover’. This is a highly tax-efficient way of providing life insurance, but is not generally available for smaller companies.

However, recent changes in legislation have allowed small companies to benefit from this arrangement by taking out ‘relevant life policies’. These can be written on an individual basis so are available to all companies no matter how small.

The tax benefits are:

• Payments are made by the company with no benefit-in-kind charge back to you
• No National Insurance implications
• Possible tax relief as a business expense depending on your individual circumstances
• Tax-free benefits to your dependants

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Life Cover

Life insurance products pay out a lump sum or an income on death. Life Insurance is usually set up to protect financial dependants in the event of death. Every individual with a mortgage should also have life cover in place to pay off the debt in the event of death.

Critical Illness Cover

Critical illness insurance pays a tax free lump sum on diagnosis of a specified critical illness that is listed in the policy. Many medical conditions are severe enough to impair or prevent working but medical advances have increased the likelihood of survival albeit with a lower quality of life. Critical Illness cover can help ease the financial burden during recovery or fund changes to the house that may be needed or even a holiday of a lifetime. These are the insured’s choices to make upon pay out. Every individual with a mortgage should have critical illness cover in place to pay off the debt in the event of critical illness.

Income Protection/Accident, sickness and unemployment protection

Everyone insures their car and their home but how many people do you think insure their income in the event of illness or injury? This income maintains their lifestyle, keeps the children in clothes and the car on the drive. Insuring your income should be a top priority. These types of policies pay out a regular income in order to ensure that family life can continue as normal until you are able to return to work, you die or you reach the end of the term. If you can only return to work part time due to the event then a proportionate income will be paid.

Private health care

Due to increasing financial pressure on the National Health Service through lack of funding and increased demand more and more people are prepared to consider purchasing private medical insurance. These types of policies are intended for use when covering the cost of medical treatment for curable short term medical conditions frequently referred to as acute conditions.

The main tax favoured savings and investment scheme that is accessible to all individuals over 16 years of age is an Individual Savings Account (Otherwise known as an ISAs). ISAs were introduced on 6 April 1999, replacing the earlier Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs). There are also Junior ISAs available for under 16s.

The maximum total investment for the 2011/12 tax year is £10,680 per individual.  Of this only £5340 of this may be invested within a cash ISA.  If you are between the ages of 16-18 you are only permitted to use the cash component.  A cash ISA is typically a savings account which is tax efficient and instantly accessible. With interest rates at historic lows a cash ISA may struggle to keep pace with inflation (cost of living) but are a better alternative to most savings accounts.  They say every penny counts and look after the pennies and the pounds will look after themselves!!

If you are over 18 then you can have access to the Investment element of an ISA. Think of an Investment ISA as an Investment that has a tax efficient wrapper put around it and generally advised over a minimum of five years to maximise returns. Due to the nature of the underlying asset classes within an Investment ISA they have a greater potential to counteract inflation. It should be noted that investments to fluctuate and can go down as well as up. It can be invested cautiously or for the more experienced investor  a more speculative Investment may be required perhaps with exposure to different geographical areas.

Investments can be made as lump sums or as monthly contributions through direct debit.  Money can be withdrawn at anytime without losing tax relief. It is not necessary to declare income or capital gains that may arise from ISA savings or Investments or even tell the tax man that you have an ISA. There are different types of ISAs available which can be tailored to an individual’s different needs and investment experience (or inexperience for that matter).

How often does the tax man look to give an individual a tax efficient means of saving  tax? Contact me (Richard Jones) for advice.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.