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Can My Limited Company Pay My Income Protection Premiums

Is it possible for me to take out an Income Protection Insurance policy and pay the premiums through my limited company?

Question asked by Brenda Yen

Buying Accident & Sickness Insurance Through Your Limited Company

Many of our clients are directors of their own limited company and in this situation there are a few options to consider when setting up an Income Protection policy.

Income Protection Insurance can either be paid by the individual out of post-tax income or paid for by the company. Which method is more cost-effective comes down to the policy choice (either a personal or executive plan) and the respective tax implications.

Personal Income Protection

With this option the policy is taken out and owned by an individual and is paid for from a personal bank account out of the individual’s net income. In this situation the monthly benefit payable to the individual upon a claim would be free from income tax under current regulations because you’ve already paid tax on the money used to pay premiums.

However, it may also be possible to take out a personal plan and pay the premiums through a limited company. Whether the premiums can be classified as a business expense would come down to the opinion of the local inspector of taxes and your accountant, so it’s important to have this discussion with them.

Executive Income Protection

Executive Income Protection is commonly taken out either by company directors looking to protect themselves or by firms wishing to offer this cover to a small number of specific staff as an employee benefit (as opposed to covering a larger number of staff under a Group Income Protection scheme).

With this type of policy the plan is actually owned by the business and any benefit paid out is paid back into the company to distribute accordingly. The business can then pay the individual the monthly benefit as a form of sick pay.

It should be noted that the payout would be treated as a trading receipt and taxed accordingly; this is why the level of cover needs to be grossed-up to leave an appropriate amount of income after tax for the director / employee (the benefit would be taxed as income for the employee).

When taking out cover through a limited company most providers require the policy to be set-up by an expert adviser. If you need any help please do not hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

  • There is no fee for our service
  • We are independent and impartial
    Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
  • We’ve got bargaining power on our side
    This allows us to negotiate better premiums for you than you going direct yourself.
  • You’ll speak to a dedicated expert from start to finish
    You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
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    We pride ourselves on providing a 5-star service, as can be seen from our 2248 and growing independent client reviews rating us at 4.92 / 5.
  • Gain the protection of regulated advice
    You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
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    You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.

Drew was incredibly helpful all the way along and very responsive and patient with any questions I had (which were many). He was able to get me a much better deal on my new health insurance than I had been able to get online. A success all round!

Francesc Sale
07/06/2019
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