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
07/08/2020

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.

Compare Top 10 UK Providers

Takes approx. 60 seconds
Verified by Norton Symantec icon
 Or Call Us

Frequently Asked Questions

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

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.

Cookies

Drewberry™ uses cookies to offer you the best experience online. By continuing to use our website you agree to the use of cookies including for ad personalization.

If you would like to know more about cookies and how to manage them please view our privacy & cookie policy.

Deny
Approve