Can my limited company pay my income protection premiums?

Is it possible for me to take out an income insurance policy and pay the premiums through my limited company?

Question asked by Brenda Yen
Compare Top 10 UK
Takes approx. 60 seconds
Type of Policy
Income Required
Date of Birth

Answered by Tom Conner

How to pay your premiums through your limited company

Many of our clients are a director 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 after 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 most commonly 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.

However, it may also be possible to take out a personal plan and pay the premiums through a limited company. In this situation, the benefit would still be free from income tax provided that the premiums are disclosed as a P11D benefit and taxed accordingly. Whether the premiums can be classified as a business expense would come down to the opinion of the local inspector of taxes.

Executive Income Protection

An executive income protection policy 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 to the business. The business is free to use the funds however they wish with the most common being to 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 level of after tax income for the director/employee (the benefit would be taxed as income for the employee).

As before, whether the premiums can be classified as a business expense would come down to the opinion of the local inspector of taxes. Drewberry usually provide both options (executive and personal) for discussion with an accountant.

None of the content in this post should be taken as tax advice. You should consult your accountant for advice on which method is the most tax efficient.

income protection
executive income protection
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
Compare Top 10 UK Insurers
  Takes approx. 60 seconds
Need help? 
Call us on 

Frequently Asked Income Protection Insurance Questions

I have been provided life insurance quotes from my mortgage adviser and they include critical illness...
What is the minimum deferred period I can have with sickness insurance? I really need it to pay our from...
I’ve heard from my friends about loss of earnings insurance. How does this work? Will it really...
What insurance can cover my salary if I suffered sickness or had an accident? I do get some sick pay...
Need Help? Live chat now and get an instant answer from our Experts...


Our Latest Reviews
Edward Brampton

They were patient thorrgh and good value for money. I regret not using them before and I will use them again in the future.

Fiona Katumwa

Very excellent service and informative. All options were offered and I had to make my own decision at the end. Would recommend.

Graham Mccollum

Very efficient and well instructed service with polite staff, I felt Drewberry really did do their utmost to find the best deal for me personally.

We are rated 4.9/5 based on 1320 independent client reviews.
To read more of our independent client reviews click here →
4.92 / 5 Average
1398 Reviews
Overall Rating
Very supportive and helped to choose effective product.
S Cutter
Overall Rating
Very professional and easy to deal with. Jake treated me like a human being and made me feel like a valued customer.
Overall Rating
Applied for an income protection plan and owing to medical condition had to make a few changes and Victoria from drewberry was really helpful
P Monaghan
Overall Rating
Courteous, prompt and clear service
D Lewis
Overall Rating
I was having trouble finding a suitable income protection policy online and was unclear about what I should be looking for, so I contacted Drewberry. The process was very quick and straightforward. They called me and explained how this type of insurance works, and then went through series of questions about my circumstances to try and find the right cover for me. They came back to me the next day with several suitable options and emailed all the relevant information clearly laid out. Michael Barrow, the advisor I spoke to, was happy to explain things in detail and answer any questions I had. I would definitely recommend Drewberry as they took all the hassle out of a confusing search.