Relevant life policies
A relevant life policy is life cover a limited company takes out on a director, paid for by the company. The premiums are usually an allowable business expense and the payout is typically free of income tax and inheritance tax — a dual benefit unavailable to PAYE employees.
What makes it special
It’s individual life cover, but written through and paid for by your limited company. Because the company pays, premiums are generally treated as a deductible business expense, reducing corporation tax — while the benefit is held in trust and usually paid free of income and inheritance tax.
For a director, that’s materially more efficient than paying for personal life cover out of already-taxed income.
Why directors choose it
- Premiums are normally an allowable business expense.
- Reduces the company’s corporation tax bill.
- Payout is written in trust, typically outside the estate for inheritance tax.
- No National Insurance or benefit-in-kind charge, unlike salary used to fund personal cover.
Who it suits
Salaried directors of limited companies — including contractors running their own company — who want efficient life cover. It complements income protection and standard life insurance rather than fully replacing them.
Relevant life policy, answered
Who can have a relevant life policy?+
It’s designed for salaried directors and employees of limited companies. As a contractor running your own company, you can usually take cover on yourself through the business — we’ll confirm eligibility for your setup.
How is it more tax-efficient?+
The company pays the premiums as a business expense, reducing corporation tax, and the payout is normally free of income tax and inheritance tax via a trust — so the same cover costs less than funding it personally.
Is it the same as death-in-service?+
It’s similar in effect but designed for small companies and individual directors, without needing a group scheme. It’s a way to give yourself comparable cover to an employee benefit.