11 Purdeys Way, Rochford, England, SS4 1ND
11 Purdeys Way, Rochford, England, SS4 1ND
Your company pays the premiums. Your family gets the payout. And unlike a personal life policy, the cover doesn’t count as a P11D benefit in kind – so there’s no extra income tax or National Insurance to worry about. A relevant life plan is one of the most tax-efficient ways a UK limited company director or employee can arrange life cover, and most people paying for personal policies don’t realise they could be doing it this way instead.
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Why pay for life cover personally when your company can? A Relevant Life Policy can save directors up to 49% in tax compared to a standard personal plan — a smarter, more efficient way to protect your family and business.
Relevant life insurance – also referred to as relevant life assurance – is a death-in-service policy arranged and paid for by a company on behalf of an employee or director. It is specifically governed by HMRC ITEPA 2003 (Income Tax (Earnings and Pensions) Act 2003), which sets out the conditions the policy must meet to qualify for its tax advantages.
Three things make it worth knowing about. First, premiums paid by the company are treated as an allowable business expense, reducing your corporation tax bill. Second, the cover is written into a discretionary trust from the outset, which keeps the payout outside the employee’s estate and away from inheritance tax. Third, the policy is not classed as a P11D benefit in kind, so neither the employer nor the employee pays National Insurance on the premiums. For a complete breakdown of how HMRC treats these policies, see our Relevant Life Policy HMRC Tax Treatment guide.
If you run a limited company and currently pay for personal life insurance out of your post-tax income, you’re almost certainly paying more than you need to. Life insurance for company directors arranged through a relevant life plan is funded by the company, not you personally – which means the cost comes out of pre-tax profits rather than your net salary or dividends. The saving can be up to 49% compared with a standard personal policy, depending on your tax position.
A couple of things to be aware of. The maximum sum assured is capped at 25 times total remuneration (salary plus benefits, but not dividends, which is a common sticking point for directors who pay themselves mostly in dividends). The cover is placed in a discretionary trust for your dependants, so the payout goes to your family without forming part of your estate – useful for inheritance tax planning.
Because premiums are an allowable business expense, they do not appear on a P11D and do not attract employer or employee National Insurance. For most directors, that alone makes the switch from a personal policy straightforward to justify.
Relevant life cover is available to employees and directors of UK limited companies. That includes sole directors of their own company, employees on the payroll, and in some cases, salaried partners. It cannot be used for the self-employed or for sole traders – the policy must be arranged by a company as employer.
One important point for directors who take most of their income as dividends: the maximum sum assured under a relevant life plan is capped at 25 times total remuneration. HMRC’s definition of total remuneration includes salary and P11D benefits, but not dividends. So if you pay yourself a low salary and top up with dividends, your maximum cover under this type of policy will be lower than you might expect. Worth checking before you apply.
Contractors operating through a personal service company (PSC) can also use the policy provided they are on their own company’s payroll. See our guide for contractors.
Company-paid Relevant Life Insurance gives business owners a smart way to offer personal protection through the company — providing peace of mind for directors and key staff while keeping things tax-efficient.
Rather than paying for cover personally, the business funds the policy — usually qualifying as an allowable business expense. The payout goes directly to the employee’s family via a discretionary trust if they pass away or are diagnosed with a terminal illness, keeping everything simple and compliant.
Because the policy is written under trust, it sits outside the company and personal estate — so it can pay out quickly and free from Income Tax or National Insurance. For directors, it’s one of the few ways to provide meaningful cover without increasing salary costs or triggering Benefit-in-Kind charges.
If you’d like a deeper dive into how the HMRC rules work in practice, take a look at our Relevant Life Insurance Taxation Guide. Or for a quick overview, download the PDF below.
Our Relevant Life Tax & Technical Guide explains, in plain English, how HMRC’s “wholly and exclusively” rules, corporation tax relief and Benefit-in-Kind exemptions apply — helping you understand exactly why this structure works so well for company directors.
Jody’s Insight
“I’ve set up hundreds of Relevant Life Plans over the years, and directors are always surprised at how efficient they are. It’s one of those rare situations where doing the right thing for your family also makes perfect financial sense for your company.”
Here’s a simple example showing how paying for life cover through your limited company can cost significantly less than paying personally. The difference comes from corporation tax relief and avoiding income tax and National Insurance.
| Scenario | How It’s Paid | Calculation | Total Cost |
|---|---|---|---|
| Basic Rate Taxpayer (20%) | Paid personally from net income | £1,000 ÷ (1 - 0.20 Income Tax - 0.02 NI) = £1,228 | £1,228 |
| Higher Rate Taxpayer (40%) | Paid personally from net income | £1,000 ÷ (1 - 0.40 Income Tax - 0.02 NI) = £1,608 | £1,608 |
| Company Paid (Relevant Life) | Paid by company (tax-deductible expense) | £1,000 × (1 - 0.19 Corporation Tax relief) = £810 | £810 |
| Approximate Saving | – | Compared to personal life cover | Up to 49% less |
Example assumptions: £1,000 annual premium, 2% employee NI, 15% employer NI, and 19% corporation tax (small profits rate). For illustration only — actual savings will vary depending on company structure and tax position.
Why not try out our Relevant Life Calculator and see how much your business could save?
💡 Try the CalculatorTo be eligible for Relevant Life Insurance for directors and employees, they must meet the following criteria:
You can contact us today to get a quote and find the most suitable policy for your company and employees.
Jody’s Insight on Eligibility
“A common misunderstanding I see is sole traders or traditional partners
thinking they can take out Relevant Life. Unfortunately, HMRC rules are clear —
you need to be an employee or director on PAYE. I’ve had cases where even
accountants assumed otherwise, so it’s always worth double-checking.”
A Relevant Life Policy is designed for employees of a limited company —
including directors who take their income through PAYE. It can also cover both full-time and part-time staff,
as long as they’re employed and on the payroll. That makes it ideal not only for directors,
but also for senior employees whose contribution is critical to the business.
It does not apply to sole traders, traditional partnerships, or LLP members,
as they’re not classed as employees for this purpose. This distinction often causes confusion,
as many business owners assume all structures qualify — but HMRC rules tie eligibility specifically
to PAYE employment status.
For directors, a Relevant Life Plan can be one of the most tax-efficient ways to provide
personal life cover, since the company pays the premiums. Contractors operating through their own
limited companies may also qualify if they’re paid as employees of that company — making it a popular
choice for one-person setups and contractors where group life schemes aren’t available.
Learn more about:
Director Relevant Life Policies |
Contractor Relevant Life Policies
“Many people assume Relevant Life is just for directors, but it can also protect key employees.
I’ve arranged cover for senior managers and technical specialists whose loss would have a serious impact
on their company. It’s about safeguarding the people who keep your business running.”
– Jody Pearmain, Director of My Key Finance Ltd
A Relevant Life Plan should always be written into a
discretionary trust from the start. This ensures that any payout
goes directly to the employee’s chosen beneficiaries — not the business — and
keeps the benefit outside both company assets and the employee’s estate for
Inheritance Tax (IHT) purposes.
Setting up the trust correctly helps:
In practice, every plan we arrange is placed into trust during the application stage —
it’s not an optional extra. Without this, the plan can lose the key tax benefits that make
Relevant Life Insurance so attractive.
Premiums must also meet HMRC’s “wholly and exclusively” test for allowable
business expenses — meaning the policy must serve a genuine business purpose rather
than personal cover.
To qualify under HMRC ITEPA 2003 and retain its tax advantages, a relevant life plan must meet a specific set of conditions. These are not complex, but they are worth understanding before you arrange cover.
Provided these conditions are met, the premiums qualify as an allowable business expense, and the payout falls outside the employee’s estate.
Premiums for limited company life insurance arranged this way are broadly comparable to standard term life insurance. A healthy non-smoking director in their late thirties can typically arrange substantial cover for well under £50 per month. The actual relevant life insurance cost depends on the individual’s age, health, the sum assured, and the policy term.
The more useful comparison is against what you’d pay personally. If the premiums are an allowable business expense, the company gets corporation tax relief on them. You don’t pay income tax or National Insurance on the benefit. The effective saving compared with funding the same cover from your net personal income can be significant, particularly for higher-rate taxpayers.
To get an accurate number for your situation, the quickest option is to request a relevant life insurance quote from us. It takes a couple of minutes and there’s no obligation.
It’s advisable to set a maximum amount of cover based on the employee’s total gross annual earnings and age. As a general guide, employees aged 17–29 can usually be insured for up to 35 times their annual remuneration, while those aged over 60 are typically limited to around 15 times their annual earnings.
The amount of cover for a Relevant Life plan should reflect the potential loss of income to the business if that employee were to pass away. This includes their salary, bonuses, benefits in kind, and regular dividends.
While a Relevant Life Plan is one of the most tax-efficient ways for businesses to provide life cover for directors and employees, other types of business protection insurance may suit different needs.
Designed to protect the business itself, this cover pays a lump sum to the company if a key person dies or becomes critically ill. The payout can help cover lost revenue, recruitment costs, loan repayments and other essential expenses.
Learn more about Key Man Insurance →
This policy ensures business continuity if a shareholder passes away. It provides funds for surviving shareholders to buy back shares and prevents ownership passing outside the business.
Learn more about Shareholder Protection →
Helps clear outstanding business loans or director’s guarantees if a key person dies or becomes critically ill, safeguarding both cash flow and credit standing.
Each option has different benefits depending on your company’s size, structure and financial commitments. If you’re unsure which route to take, we can compare them side-by-side to find the most cost-effective cover for your business.
To get the right protection for your company and staff, speak to My Key Man Insurance. We compare policies from leading UK insurers to find cover that fits your business needs and budget.
If you’re unsure whether a Relevant Life Policy or a personal life insurance plan is the better route, our specialists will explain the tax differences and help you decide what’s most efficient for your situation.
3 Simple Steps.
Submit the details of the key member of staff
We then compare the quotes
And then submit application to underwriting.
What people are saying about us.
Jody was very helpful in explaining the options and I thoroughly recommend his company
We received a wonderful service from mykeyman and will be using them again. The service and product knowledge from team is excellent. Everything was made easy to understand. The price was the most suitable we found too.
I had a great time working with My Key Man Insurance when I applied for the different insurances they offer.They were able to answer all of my questions quickly and effectively. I will recommend them to my friends and family.
It is so amazing working with this insurance company. i have had many unpleasant experiences with some insurances company in the past but working with Mykey insurance has really change my opinion and believe about insurance company.
The standard of service was first class. They kept me up to date with progress on my Relevant Life Policy, followed up promptly following delays caused by my medical practice being slow in compiling reports, and responded instantly and clearly to any questions I had.
We received a wonderful service from mykeyman and will be using them again. The service and product knowledge from team is excellent. Everything was made easy to understand. The price was the most suitable we found too.
Jody was very helpful in explaining the options and I thoroughly recommend his company
What is the difference between the two policies and the most suitable set up for your company.
As a contractor, managing your finances and securing protection for your loved ones is very important…
Both Keyman Insurance and Relevant Life Cover are types of life insurance that the business pays for….
While both offer the same kind of cover there are some differences well worth noting..
Clear, UK-specific answers from our director to help you decide if Relevant Life is right for your company and employees.
Death in Service is a group employee benefit that pays a lump sum if an employee dies while employed and typically ends when they leave the company.
Relevant Life is an individual, employer-funded life policy set up for a single employee (often a director) and written into trust for their beneficiaries. It is not a group scheme and will normally end if the employee leaves unless a new employer takes it over or the cover is replaced.
The employer is the policy owner and premium payer. The plan is placed into a discretionary trust at outset; on a valid claim, the trustees receive the proceeds for the beneficiaries.
No. It can cover any employee of a UK business. It’s commonly used for directors and senior employees in SMEs because it’s typically more tax-efficient than personal life cover.
Insurers set limits by age and total remuneration (salary plus regular dividends/benefits). Typical maximums fall between 15× and 25× remuneration depending on age band, but exact multiples vary by insurer and underwriting.
No. Under HMRC rules for Relevant Life, cover is for death (and usually terminal illness) only. Critical illness cover is not permitted on a Relevant Life plan.
Yes. Relevant Life policies are set up in a discretionary trust so benefits are normally outside the employee’s estate for Inheritance Tax and can be paid to the intended beneficiaries efficiently.
Relevant life insurance is a company-paid death-in-service policy for UK employees and directors. It pays a tax-free lump sum to the employee's dependants via a discretionary trust if they die during the policy term. Unlike personal life insurance, the premiums are an allowable business expense, there's no P11D benefit-in-kind charge, and the payout falls outside the estate for inheritance tax purposes. It's one of the most tax-efficient forms of life insurance for company directors available under UK law.
For most directors, yes. If you currently pay for personal life insurance out of post-tax income, switching to a relevant life plan paid for by your company usually works out cheaper in practice. The company gets corporation tax relief on the premiums; you avoid the income tax and National Insurance you'd otherwise pay to fund the cover personally. The main thing to check is whether your total remuneration (salary plus benefits, not dividends) is high enough to support the level of sum assured you want.
Yes, provided the contractor operates through their own personal service company (PSC) and is on the company's payroll. The same relevant life policy rules apply: the company arranges and pays for the policy, the cover is written into a discretionary trust, and premiums are treated as an allowable business expense. The one restriction to be aware of is the 25 times total remuneration cap on the sum assured, which affects contractors who pay themselves a minimal salary.
Under HMRC ITEPA 2003, a relevant life plan must be a fixed-term policy (not whole of life), must pay out only on death or terminal illness, must be written into a discretionary trust, cannot include any investment or surrender value, and the sum assured cannot exceed 25 times total remuneration. Where all conditions are met, premiums are an allowable business expense, no P11D benefit-in-kind charge applies, and the payout is free of inheritance tax.
The maximum sum assured on a relevant life assurance policy is 25 times total remuneration in the year the policy commences. Total remuneration means salary and P11D benefits - not dividends. So if you pay yourself a salary of £12,000 and take the rest as dividends, your maximum relevant life insurance UK cover would be £300,000 (25 x £12,000), regardless of your overall income. If that's not enough, it's worth talking to us about what other options might work alongside a relevant life plan.
Information is general guidance for UK businesses. Always check the specific insurer’s terms and your tax position with your accountant. Policy features and financial limits vary by provider and underwriting.
