The long-awaited has now finally happened ? tax relief is available for life insurance. However it's only on certain policies that you can benefit from the tax breaks ? and the new rules won't apply to life insurance policies that were already in place before the budget announcement on March 22nd.

These new policies will represent a decent saving - of between 5% and 15% for average rate taxpayers and around 30% to taxpayers who pay the higher rate.

There are a number of restrictions however. You can't add critical illness insurance onto your life policy, you must fix the insured sum, and the policy must be for a single life only ? joint policies will not benefit. So in short, it needs to be a single life, level term, pretty standard issue policy.

There are a few more few restrictions but we seriously doubt they will apply to many ? except perhaps the rich and famous! For example, you will not be eligible if:

?you pay more than ?215,000 of combined life insurance premiums and pension payments in one year; and

?if the combined value of your pension and life insurance payout is over ?1,500,000, then a tax charge of 55% will apply to the excess. This is a stipulation that does not apply to conventional life insurance policies.

If you are a standard rate taxpayer, you will pay a lower premium which already takes into account the tax relief calculation. It is all done automatically by the life insurance company.

Higher rate taxpayers will pay the usual premium and then use a self-assessment tax return to claim the tax relief. However, the Inland Revenue can amend your tax code so that you are given the tax relief automatically, removing the need to fill out the long-winded tax return forms.

The life insurance policies that work to these restrictions will cost slightly more than policies that don't. That's because the company will be administering the tax relief and they are also subject to certain rules stipulated by the Inland Revenue, It should still mean that savings for most people on the tax relief outweigh any extra costs.

The tax relief is actually possible as a result of a loophole in the new Finance bill, and it is always possible that Gordon Brown could address the loophole, however it is virtually unknown for a future tax change to be applied retrospectively so there shouldn't be a problem. If your income decreases and you move into a lower tax bracket that would also affect how much you save.

If you want to make the most of this tax relief then you can go to the majority of the big insurers and independent life insurance brokers. You will need to talk to an advisor in person though, it's not possible to sort it out online.

You also need to know what to look for, which can be quite difficult as companies are giving different names to these policies, like Life Insurance with Tax Relief, Life Protection with Tax Relief , and Pension Term Insurance ? they are all basically describing the same type of policy.

And just to make it clear, you don't have to take out a pension to benefit from the tax relief.