Why local business owners and a local finance advisor are synonymous.
Running a business is demanding at the best of times, but when you’re also the sole director and main income earner, the stakes feel even higher. This was the case for Susan, who runs a successful marketing consultancy. Concerned about what would happen to her family and business if she fell seriously ill or passed away unexpectedly, Susan turned to Castle Stonebridge Financial Planners for help.
As a local finance advisor with years of experience supporting business owners like Susan, we understand the unique challenges faced by directors who want to protect their income and loved ones — but without putting unnecessary strain on their personal finances or their company’s bottom line.
Background: Susan’s Situation
Susan had built her marketing consultancy from the ground up. As the sole director, she wore many hats—strategy, client management, and of course, the financial risks that come with being the primary income generator. Yet, despite her success, she hadn’t arranged any personal or business protection cover.
Like many directors, Susan assumed personal protection policies were her only option. She wasn’t aware that her limited company could help fund protection policies in a tax-efficient way, which would reduce the cost to her personally.
Susan wanted to ensure that:
- Her income would be replaced if she became unable to work through illness or injury
- Her family would be financially secure in the event of her death
- She could make use of legitimate tax reliefs available to her business
- The protection plan was straightforward and easy to maintain
With these goals in mind, Susan contacted us, a local finance advisor, to explore how best to safeguard her future and that of her family.
The Challenge: Finding the Right Protection Without Overcomplicating Things
Susan’s situation is not uncommon. Many small business owners and company directors find themselves unsure about the best way to protect their income and family without complicated policies or expensive premiums paid from already-taxed personal income.
Her lack of any existing cover meant starting from scratch, but with careful planning, we knew it was possible to design a package that met her needs, was affordable, and took full advantage of tax reliefs offered through her company.
Our Approach: A Tailored Review and Tax-Efficient Strategy
At Castle Stonebridge, we take pride in being a trusted local finance advisor who listens closely to clients’ concerns and goals. The first step was a full protection review, assessing the risks to Susan and her family if she could no longer work or were to pass away.
We worked closely with her accountant to understand the tax implications and ensure any solution would align smoothly with her business’s financial position.
Key Strategies Implemented
1. Relevant Life Policy
One of the most effective solutions we put in place was a Relevant Life Policy. This is a life insurance policy paid for by Susan’s limited company, offering significant tax advantages:
- Premiums are deductible for corporation tax purposes, reducing the company’s taxable profits.
- No Benefit-in-Kind charges apply, so Susan wasn’t personally taxed on the premiums.
- On death, the payout would be made tax-free to her nominated beneficiaries, held in a discretionary trust to protect the family and ensure the lump sum isn’t caught in probate or inheritance tax.
This policy gave Susan peace of mind knowing her family would receive a meaningful financial sum if the worst happened.
2. Executive Income Protection
To safeguard Susan’s income if she became too ill to work for a period, we arranged an Executive Income Protection policy, again paid through her business:
- Premiums were corporation tax deductible.
- The policy would replace a proportion of her pre-incapacity salary and dividends, helping maintain her lifestyle during recovery.
- We accounted for pension contributions to ensure her retirement plans wouldn’t suffer due to illness.
- This long-term safety net meant Susan could focus on getting better without financial worries.
3. Trusts and Documentation
It’s not just about having the right policies but also about how they’re set up. We placed Susan’s life cover in a trust, which is crucial for:
- Keeping the policy proceeds outside of her estate for inheritance tax purposes.
- Avoiding probate delays so her family could access funds quickly.
- Simplifying ongoing reviews with clear, straightforward documentation.
We made sure Susan fully understood the paperwork and how everything worked so there were no surprises later.
The Outcome: Peace of Mind and Tax Savings
Thanks to the expertise and tailored approach of Castle Stonebridge as her local finance advisor, Susan now enjoys comprehensive protection that suits her business and family needs perfectly.
Here’s what she gained:
- Tax Efficiency: Paying premiums through her company saved her corporation tax, national insurance, and income tax that she would otherwise have paid on personal premiums.
- Ongoing Savings: Each month, premiums are offset against the company’s corporation tax liability, easing cash flow.
- Family Protection: Her family has peace of mind knowing they’re protected by a tax-free lump sum and income replacement if needed.
- Inheritance Tax Planning: Because of the trust structure, the life cover won’t add any further inheritance tax complications.
- Simplicity: Clear, straightforward documentation and regular reviews keep Susan’s protection plan hassle-free.
Susan told us recently, “I had no idea there were so many ways my company could help protect me and my family without costing a fortune. Having a local finance advisor who understands my business and tax situation made all the difference.”
Why Work with a Local Finance Advisor?
Susan’s case highlights why it’s crucial to engage a local finance advisor who not only knows the technical side of financial protection but also understands the unique challenges faced by local business owners.
Being local means:
- Face-to-face meetings to build trust and clarity
- Tailored advice that considers your local market and tax environment
- Easy access for regular reviews and ongoing support
If you’re a business owner or director like Susan and want to explore how you can protect yourself, your family, and your business in a tax-efficient way, a local finance advisor can guide you through your options and help put plans in place that give you true peace of mind.
Castle Stonebridge Financial Planners is proud to support business owners in our community. If you’d like to discuss your own protection needs, get in touch for a no-obligation chat with one of our expert local finance advisors today.
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