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Contractor Income Protection Options: Executive vs Personal

  • 01-09-2017 10:45am
    #1
    cobrakev
    Registered Users Posts: 15 ✭


    Hi, I am a Contractor, i.e. I am the Director of my own private limited company but pay myself through the company as an employee.
    I am looking to find out whether I should go with Executive Income Protection or Personal Income Protection and which option is better from a tax perspective. I've tried to discuss this with an Insurance Broker but their understanding of the tax implications for each is surprisingly limited.

    My understanding is that with Personal income protection, I would pay myself through the company as normal and pay the policy premium personally. I could then apply for tax relief on the premiums paid (at the marginal rate 40%). With Executive Income Protection the company would pay the premium directly and so personal income tax would not be charged in the first place (and therefore no need to apply for income tax relief) and I can claim tax relief on the premiums at the corporation tax rate (12.5%). Therefore it seems to me that the Executive Income Protection is the better option. Can anyone verify this?

    Thanks


Comments

  • #2
    Nody
    Moderators, Category Moderators, Arts Moderators, Business & Finance Moderators, Entertainment Moderators, Society & Culture Moderators Posts: 18,327 CMod ✭✭✭✭Nody


    Would you not be better of speaking with your accountant on the route to take?


  • #3
    bmwguy
    Closed Accounts Posts: 2,006 ✭✭✭bmwguy


    cobrakev wrote: »
    Hi, I am a Contractor, i.e. I am the Director of my own private limited company but pay myself through the company as an employee.
    I am looking to find out whether I should go with Executive Income Protection or Personal Income Protection and which option is better from a tax perspective. I've tried to discuss this with an Insurance Broker but their understanding of the tax implications for each is surprisingly limited.

    My understanding is that with Personal income protection, I would pay myself through the company as normal and pay the policy premium personally. I could then apply for tax relief on the premiums paid (at the marginal rate 40%). With Executive Income Protection the company would pay the premium directly and so personal income tax would not be charged in the first place (and therefore no need to apply for income tax relief) and I can claim tax relief on the premiums at the corporation tax rate (12.5%). Therefore it seems to me that the Executive Income Protection is the better option. Can anyone verify this?

    Thanks

    You are correct. Company is indeed the way to go. Same with pensions


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