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
 Protection
Insurers
 
Takes approx. 60 seconds
Type of Policy
Income Required
per
month
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327333
Our in-house Experts are here to provide FREE impartial advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at

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.

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 applied for Income Protection a couple of years ago and got declined. I’ve been thinking about...
 
I want to protect my earnings against the risk of accident and sickness and have been considering income...
 
I have recently taken out a mortgage and want to put some insurance in place to cover the loan in case...
 
I’m a 35 year old male with diabetes and i’m looking to take out Income Protection to cover...
Need Help? Live chat now and get an instant answer from our Experts...

Neil
Pensions

Victoria
Insurance
Our Latest Reviews
Kevin Ballinger
29/11/2018

Excellent service. Well documented and prompt meetings arranged, with polite reminders. Good, clear advice and excellent product choice for me. Very pleased and highly recommended.

Kylee Kelly
22/11/2018

Jake and Jack and Drewberry were excellent and I would definitely use their services again. We purchased life insurance from them and we are now getting them to look into income protection cover for us. They are very knowledgeable and the set up was a breeze.

Priyadharshini Westphal
25/11/2018

Really personalised service. Would definitely recommend. Very helpful and not pushy. Oliver was through and lovely to speak to.

We are rated 4.9/5 based on 1742 independent client reviews.
To read more of our independent client reviews click here →
REVIEWS
EXCELLENT
4.92 / 5 Average
1920 Reviews
D Coyle
Overall Rating
Fantastic service from Egle, knowledgeable and patient about a variety of policies. Egle helped me get the best deal available and I am very satisfied with the professional service that I received from her and Jack.
S Redmond
Overall Rating
Sarah was totally professional, not at all pushy which I liked, but went over every detail to make sure I knew about the policy and to make sure it was the right policy for me. Would totally recommend Sarah. Regards Siobhan
A Allen
Overall Rating
Sarah Melvin at Drewberry helped me get a good deal on my income protection. She was very patient, helpful and professional. I feel if I had any problems I could contact her. Thank you and I would definitely recommend Drewberry.
B o'connor
Overall Rating
Very helpfully and found me the right cover that suited me and my cost of what I wanted to pay. Diffenatly use him again
G O'Grady
Overall Rating
Emma Wilson @ Drewberry was fantastic providing a simple and seemless service from quote through to contracts. Would recommend without hesitation.