Choose a scheme

Choices to make the scheme tax efficient

Setting up a scheme under trust offers tax advantages for your client and their employees.

Type of scheme

You can choose from:

  • registered schemes
  • excepted group life policy schemes, or
  • a combination of both

Different rules and taxes apply to these two scheme types. While registered schemes are most common, there are circumstances where an excepted group life policy scheme may be preferable. Read our PDF file: Customer guide to Excepted Group Life Policies PDF size: 230KB  for more information.

Registered schemes

  • Set up using a trust with scheme rules and registered online with HM Revenue & Customs.
  • Can provide lump sum life assurance and/or dependants’ pension benefits.
  • Offset premiums against profits for tax purposes.
  • Not taxed as a benefit in kind for employees.
  • Tax free lump sum benefits up to the Lifetime Allowance.
  • Dependants’ pension benefit subject to income tax.
  • Check if employees have applied to HM Revenue & Customs for Enhanced or Fixed Protection. These valuable protections against the tax charge above the Lifetime Allowance will be lost if they join a registered scheme.

Excepted group life policy schemes (relevant life policy schemes)

Our excepted group life policy provides benefit under a non-registered scheme.

  • Set up using a trust with rules.
  • If the local tax inspector agrees, your client can offset premiums against their profits for tax purposes.
  • Not taxed as a benefit in kind for employees.
  • Lifetime Allowance doesn’t apply, and employees won’t lose Enhanced or Fixed Protection when they join.
  • Exit and periodic tax charges may apply to benefit at a maximum of 6% in each case.
  • Can only provide lump sum benefit.
  • Can only pay benefit to individuals and charities.

References on this page to the tax treatment of premiums and benefits are based on our current understanding of law and HM Revenue & Customs practice, which may change.

Setting up a scheme

Your client can: