If you’re a director of a UK limited company, there’s a tax-efficient way to protect your family and provide peace of mind.
Relevant Life Insurance (unlike personal life insurance) is paid for by your company, not from your own hard earned taxed income. That means better protection, lower costs, and smart tax planning.
Here’s why more business owners and directors are using their limited companies to fund life insurance through a Relevant Life Policy.
So what is Relevant Life Insurance?
Relevant Life Insurance is a type of life cover that a limited company can take out to provide a death-in-service benefit for an employee (which can include directors). It pays out a tax-free lump sums to the employee’s beneficiaries if they pass away during the policy term.
1. Tax Efficiency at Its Best
This is the standout benefit. A Relevant Life Policy is typically:
- Corporation tax-deductible: Premiums count as an allowable business expense, reducing your company’s taxable profit.
- Free from employer National Insurance contributions: Unlike a salary or dividend, there’s no NI to pay on the premiums.
- Not treated as a benefit in kind: So you personally don’t pay income tax on the premiums.
- Free from inheritance tax: Policies are written into a discretionary trust, meaning the payout goes directly to your beneficiaries, skipping probate and avoiding inheritance tax.
There aren’t too many tax efficient ways of getting your money nowadays but this is definitely one of them.
2. Protect Your Loved Ones Without Using Personal Income
Paying for life insurance from your post-tax income can be expensive. By using your company to pay the premiums, you essentially get more coverage for less. The savings can be substantial when you factor in income tax, National Insurance, and dividend tax, so what’s not to like about it!
3. Ideal for Directors and Small Businesses
Relevant Life Insurance was designed with small businesses and directors in mind—especially those who don’t have access to larger group schemes that big companies often offer.
If you’re the sole director or one of a few employees, this is a powerful tool to get similar protection.
4. No Impact on Your Pension Allowance
Unlike some other life cover options, Relevant Life doesn’t count toward your annual or lifetime pension allowances. That makes it a valuable benefit, especially for high earners already navigating pension limits.
5. Flexible and Portable
If you leave the company, you can often transfer the policy to your new employer or convert it into a personal plan. It’s designed to be flexible and follow you if your circumstances change.
In Summary
Relevant Life Insurance is one of the most tax-efficient ways for directors and small business owners in the UK to provide life cover. It lowers your costs, saves on tax, and ensures your family is financially protected if the worst should happen.
From both a tax savings and personal point of view this is something all company directors should consider and offers great tax savings and peace of mind. If you want to know more give us a shout and we will get an appointment set up for you with an advisor.