Should A Key Person Insurance Policy Be Written In Trust?

I have been doing some research into Key Man protection for my business. However, I’ve not come across whether I should write Key Person Insurance into trust for tax purposes?

Question asked by Nina Cuesta

Key Person Insurance pays a lump sum to the business if a member of staff dies or becomes critically ill.

It is important to recognise that this is a policy a business takes out to protect its future profits and the success of the company. As such, the key person in question pays no premium and receives no benefit from the policy.

You set up the policy on the life of another with the business paying the premiums. Also, the insurer pays any benefit back to the business.

Given this arrangement, there’s usually therefore no need to set the policy up in a trust.

In fact, setting up the policy in trust may actually be detrimental, as it could delay the funds going back into the business when you need them the most.

However, while a trust for Keyman Insurance isn’t usually necessary, it’s worth noting that there will likely be some tax implications on a claim from the money going back into the business. HMRC typically treats this as a kind of trading receipt and therefore taxes it accordingly.

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
Personal Insurance & Accounts Payable
Telecom House
125-135 Preston Road
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

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.


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.