How is Business Loan Insurance Taxed?

I’ve taken out a commercial loan and I’m looking for Business Loan Insurance to make sure my company can repay the loan should I die. However, where the business pays for it, I’m not sure how HMRC treats it for tax purposes. Can you help?

Question asked by Mr R Schulls

Business Loan Insurance pays out if a person responsible for repaying a commercial loan passes away or becomes critically ill.

The tax position for this protection is actually relatively simple.

Premiums do not meet the ‘wholly and exclusively for the purposes of trade’ business protection test. This refers to whether the benefit from a policy will be ‘wholly and exclusively’ for the business.

As such, premiums are therefore not usually tax-deductible because the benefit is destined for the lender, not the business. Instead, premiums are treated as a cost of raising capital. You’ll therefore not be able to claim corporation tax relief on premiums.

However, a Business Loan Insurance payout is typically tax-free. This is because the benefit isn’t ultimately destined for the business, rather is earmarked for the lender to repay the loan.

I’ve held a policy with Drewberry for several years now. They are always friendly, insightful and offer great service.

Dan Pettitt
13/01/2021
Reviews.co.uk Logo
Compare Top 10 UK Business Insurers
Takes approx. 60 seconds
  • £

Or call us on 0208 432 7333

Compare Top UK Insurer Quotes Logos
Contact Us
Head Office & Pensions and Investments
Senator House
85 Queen Victoria Street
London
EC4V 4AB
Personal Insurance & Accounts Payable
Telecom House
125-135 Preston Road
Brighton
BN1 6AF
Drewberry London Office MapDrewberry Brighton Office Map
Our Core Principles
  • 1You Come FirstWe are a client focused business who always aim to put you first.
  • 2We are ExpertsTo provide you with the best advice, we need to know our stuff!
  • 3We are HumanWe are real people with feelings who are here to help you.
  • 4We are ProfessionalProviding a 5-star service requires a professional approach to everything we do.
  • 5We are here to EducateWe don't believe in sales, we are here to educate so you can make informed decisions.
Finalist - Moneyfacts AwardsFinalist - Cover Excellence AwardsHighly Commended - Protection Review Awards
Proud member of AMII (Association of Medical Insurers & Intermediaries)Proud member of Money Advice ServiceProud member of UnbiasedProud member of BIBA (British Insurance Brokers' Association)

If you are unhappy with our service, we have a complaints procedure, details of which are available upon request. If you are unhappy with how your complaint has been dealt with, you may be able to refer your complaint to the Financial Ombudsman Service (FOS). The FOS website is www.financial-ombudsman.org.uk.

Drewberry Ltd is registered in England and Wales. Companies House No. 06675912

Drewberry Ltd registered office: Telecom House, Preston Road, Brighton, England, BN1 6AF. Telephone 0208 432 7333

Drewberry Ltd (Financial Conduct Authority No. 505473) is an Appointed Representative of Quilter Wealth Limited and Quilter Mortgage Planning

Limited, which are authorised and regulated by the Financial Conduct Authority.

Cookie Use

Drewberry™ uses cookies to offer you the best experience online. By continuing to use our website you agree to the use of cookies. If you would like to know more about cookies and how to manage them please view our privacycookie policy.