Life Assurance UK
Using life assurance policies to reduce your tax burden.
By buying life assurance UK customers can often improve their tax position, indeed there are several policies designed specifically to either reduce tax (MIPs) or insure against tax liabilities (inter-vivo policies).
When it comes to life assurance UK taxpayers have a couple of tricks up their sleeves. There are plenty of ways that life policies can help keep the taxman at bay.
High net worth individuals (specifically higher rate taxpayers) can use a specific type of life policy, the Maximum Investment Plan (or MIPs) as a form of regular savings plan. MIPs are unit-linked endowment policies incorporating life cover at the absolute minimum rate to qualify for tax purposes, plus a burgeoning unit contribution which embodies the savings feature and benefits from the tax leniency applied to life products.
MIPs funds’ capital and income benefits are only taxable at lower and basic tax rates, thus providing a tax shelter for higher rate earners. They also benefit from a fair level of premium flexibility- so you can usually contribute more if you wish.
That’s an example for big-shots, but there are other ways in which by using life assurance UK taxpayers can save some money. You can, for example, take out a seven year decreasing term policy (called an inter-vivo) designed to cover the inheritance tax on a value-transfer in the event that you should die before the seven year tax window on transfers is complete.