How Does HMRC Treat Relevant Life Insurance?

I’m a Company Director needing Life Insurance. I spoke to an old colleague and they suggested Relevant Life Insurance paid for by my limited company. I was just wondering how Relevant Life Insurance is taxed by HMRC as I don’t want to set up a policy that creates tax issues!

Question asked by Mr R Jones

How is Relevant Life Insurance Taxed?

It’s a very good question. We’re often asked how Relevant Life Insurance is taxed. As you say, it’s run through your limited company, which means your business will own the policy and pay the premiums, even though it will be underwritten based on your life.

This can lead to some confusion because it’s different from the way a personal policy is set up. These are paid for outside the company using post-tax income.

A Relevant Life policy, however, is paid for from company funds. Relevant Life Insurance is designed to replicate a Death In Service scheme but instead of covering a whole group of employees it protects an individual. Similar to a group scheme, premiums are eligible for corporation tax relief and as it is paid for directly by the business there is no income tax and National Insurance.

Example Savings

Personal Life Cover
Relevant Life Cover
Cost to Individual
Monthly Premium
Employee NI Contribution
Income Tax
Cost to Business
Employer NI Contributions
Gross Cost
Corporation Tax
Total Cost
Total Savings


HMRC does not treat Relevant Life Insurance as a P11D or benefit in kind, meaning there’s no additional tax to pay despite you having the premiums paid on your behalf.

The benefit is also paid tax-free. This is because, when you set up a Relevant Life policy, you write the policy into trust to keep it separate from both your business and your estate.

Keeping it separate from your business means there are no tax complications if you pass away and the money is paid back into your company. Holding the money outside your estate, meanwhile, means your estate won’t be liable for inheritance tax on the payout and your loved ones can get access to it faster, without having to go through probate.

To qualify for tax relief, the policy must be wholly and exclusively for the benefit of the business and not seen to be solely to avoid tax.

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