Maximum income calculator

Work out the maximum income your client can apply for under Income Protection.

This calculator allows you to work out the maximum income your client can apply for under Income Protection. It doesn’t apply to Key Person Income Protection.

This calculator will also allow you to enter your client’s sick pay arrangements to help you make a recommendation that is tailored to their needs.

Any income from other plans your client has isn't taken into account. You should deduct this from the result unless those plans are to be cancelled.

The maximum annual income available is:

  • 65% of the first £15,000 of your client’s earnings before tax plus
  • 55% of their remaining earnings before tax above £15,000
  • The overall maximum is £250,000 a year (£20,833.33 a month)

Calculation values

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This is the person covered’s gross annual salary including regular bonuses and commission received by them.

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This means dividends received by the person covered from a private limited company in which they and no more than three other shareholders are employed as full-time working directors.

The dividend amount must:

  • represent their share in the net trading profit of that company from its normal regular business,
  • be consistent with the trading position of the company, and
  • stop being paid as a result of incapacity.
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This means the taxable value of any of the following benefits shown on form P11D that will be lost as a result of the person covered’s incapacity:

  • living accommodation where they live and pay council tax
  • company car when used for private use
  • car fuel which is provided for use with their company car
  • beneficial loans including loans for travel tickets
  • insurance such as critical illness insurance, private medical insurance and accident and travel insurance.

 

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This means the person covered’s total share of pre-tax profit from their trade, profession or vocation for the purposes of Part 2 of the Income Tax (Trading and Other Income) Act 2005 for the 12 months before they became incapacitated.

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This means their share of the amount of any regular or fixed payment the person covered is required to make:

  • by legislation
  • by regulation
  • under a contract to purchase goods or receive services
  • in respect of a loan, mortgage or credit agreement used to purchase premises, plant, machinery, raw materials or equipment

that is necessary for the continuous operation of their trade, profession or vocation and has been paid for at least the last 36 months at the time the person covered first met the requirements of our definition of incapacitated, but only for so long as the person covered remains liable for those payments.

Any amount payable:

  • to or for the benefit of a person employed by the person covered under a contract of employment,
  • in respect of national insurance or any tax other than:
    • business rates
    • vehicle excise duty in respect of a vehicle used for the purposes of the person covered’s trade, profession or vocation
    • insurance premium tax, or
    • value added tax
  • in respect of any contract to purchase goods or receive services, loan, mortgage or credit agreement entered into after the person covered first met the requirements of our definition of incapacitated, 

is not included.

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This means the salary received by the person covered’s spouse or cohabiting partner where the person covered is employed by the same company as them.

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The person covered’s spouse’s or cohabitating partner’s salary would need to be a nominal amount (up to a maximum of £12,500 a year), and they do not contribute towards generating the profit of the company.

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This means dividends received by the person covered’s spouse or cohabiting partner where the person covered is employed by the same company as them.

Any dividend amount received by a spouse or cohabiting partner must:

  • represent their share in the net trading profit of that company from its normal regular business,
  • be consistent with the trading position of the company, and
  • stop being paid as a result of the person covered’s incapacity.
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Results

Annual maximum income {{ calc.maxIncome | rlCurrency }}

Sick Pay

Deferred Period Maximum annual benefit Maximum monthly benefit
Cover 1 {{ calc.cover1.deferredPeriod }} weeks {{ calc.cover1.maximumAnnualBenefit | rlCurrency }} {{ calc.cover1.maximumMonthlyBenefit | rlCurrency }}
Cover 2 {{ calc.cover2.deferredPeriod }} weeks {{ calc.cover2.maximumAnnualBenefit | rlCurrency }} {{ calc.cover2.maximumMonthlyBenefit | rlCurrency }}
Cover 2

Warning: Our maximum deferred period is 52 weeks

Warning: Sick pay is higher than the maximum insurable income

Please note, this calculator is very general in nature and won't exactly reflect your client’s personal tax situation. The information shouldn't be construed as legal or tax advice.

The calculator assumes:
• no sick pay is received after the second deferred period,
• the percentage of company sick pay provided relates to the employee’s gross annual salary,
• your client has use of their full basic personal tax-free allowance and the allowance will be restricted where earnings exceed the limit for the full personal allowance, and
• your client is subject to not-contracted-out Class 1 National Insurance Contributions.

It doesn’t take into account any changes to the personal allowance based on their personal circumstances.

This information is based on our current understanding of law and HM Revenue & Customs practice for the tax year 2019/20. It uses the personal tax rates listed on www.gov.uk and uses English tax rates only. It may be affected by future changes and individual circumstances.

This website is intended for financial advisers only and shouldn't be relied upon by any other person. If you are not an adviser please visit royallondon.com.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.