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Limited Company Life InsuranceTax-Efficient Cover Through Your Ltd
How limited company directors and employees can save thousands by arranging life insurance through the business. Relevant life, key person and shareholder protection for Ltd companies.
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Book a Free ConsultationKey Facts: Limited Company Life Insurance
Limited company life insurance allows directors and employees to get life cover paid through the business, saving on tax and National Insurance.
- -Relevant life insurance premiums are corporation tax deductible with no P11D charge
- -Key person insurance protects the company from financial loss if a key individual dies
- -Shareholder protection funds buy-sell agreements between company shareholders
- -Sole directors of one-person companies qualify for relevant life insurance
- -Combined employer and employee NI savings of up to 27.8% compared to salary equivalent
- -Policies can cover life only, critical illness, or both
What Is Limited Company Life Insurance?
Limited company life insurance specifically covers life insurance arranged through a UK limited company structure. The key advantage is tax efficiency — limited companies can deduct qualifying premiums against corporation tax, and directors avoid personal tax on relevant life benefits.
This page focuses on the options available to Ltd company directors and employees specifically. If you are a sole trader, partnership, or looking for broader business protection options, see our business life insurance hub instead.
Under HMRC rules (BIM45525), limited companies can claim tax relief on key person and relevant life premiums. However, BIM45530 warns that director-shareholders face restrictions when the policy protects share value rather than trading income — the so-called "shareholder trap".
For Sole Directors
One-person limited companies can take out relevant life insurance on the sole director. You must be drawing a salary (even the NI threshold amount). Corporation tax deductible, no BIK.
For Multiple Directors
Each director gets an individual relevant life policy. Cover amounts can vary by director based on salary and needs. Add key person insurance for business protection.
For Employees
Companies can provide relevant life insurance for any employee as a tax-free benefit. No minimum employee numbers unlike group death-in-service schemes.
For Shareholders
Shareholder protection insurance funds cross-option agreements. Essential for companies with multiple shareholders to control what happens to shares on death.
Tax Benefits of Limited Company Life Insurance
The tax advantages of arranging life insurance through your limited company are substantial. Here is how each policy type is treated according to HMRC corporation tax rules:
Corporation Tax Relief
Relevant life and qualifying key person premiums reduce your corporation tax bill. At 25% CT rate, a £100/month premium effectively costs £75/month.
Zero P11D Charge
Relevant life insurance creates no benefit-in-kind. Unlike company cars, private medical or gym membership, there is no P11D reporting or tax charge for the director/employee.
NI Savings: Both Sides
No employer NI (13.8%) and no employee NI (2-8%) on relevant life premiums. Total NI saving up to 21.8% compared to grossing up salary to buy personal cover.
Inheritance Tax Free
Relevant life payouts via trust sit outside the estate for IHT. No 40% inheritance tax regardless of estate size. This benefit alone can save families tens of thousands of pounds.
No Lifetime Allowance Issue
Unlike group death-in-service (a registered pension benefit), relevant life is not subject to pension allowances. No tax charge on large payouts.
IR35 Compatible
Even directors inside IR35 can benefit from relevant life insurance, as it is an employee benefit not affected by off-payroll working rules.
Limited Company Life Insurance vs Alternatives
Through the Company vs Personal Cover
Key Person Insurance
Company pays from pre-tax profits. Corporation tax, income tax and NI savings. Relevant life payout is IHT-free via trust.
Other Product
Individual pays from post-tax income. No tax relief. Payout may be in estate for IHT. More expensive for the same cover.
When you need it: Limited company directors should almost always arrange cover through the company. The only exception is if you want complete separation between personal and business finances.
Relevant Life vs Group Death in Service
Key Person Insurance
Individual policies, no minimum staff. Not part of pension scheme so no lifetime allowance issues. Flexible cover per person.
Other Product
Group scheme needing 3-5+ employees. Registered pension benefit subject to allowances. Fixed multiple of salary for all.
When you need it: Small limited companies (1-10 staff) benefit from relevant life. Larger companies (20+) may find group schemes more cost-effective per head.
Setting Up Life Insurance Through Your Limited Company
Here is how to arrange limited company life insurance for your business:
- Relevant life insurance — The company applies as policyholder. A trust deed is completed (provided free by the insurer). Premiums are paid from the company bank account. See our relevant life for directors guide.
- Key person insurance — The company is both policyholder and beneficiary. No trust needed. Premiums paid by the company. See our key person insurance for limited companies guide.
- Shareholder protection — Each shareholder takes out a policy. A cross-option agreement is drawn up by a solicitor. See our shareholder protection guide.
For a full overview of all business protection options, visit our business life insurance hub.
Limited Company Life Insurance: UK Numbers
5.5m+
Active limited companies on the UK register
Source: Companies House 2024
£78
Average CPC for limited company life insurance
Source: DataForSEO March 2026
75%
Of Ltd company directors unaware of relevant life insurance
Source: Drewberry Insurance Survey 2024
25%
Corporation tax rate for relief calculation
Source: HMRC 2025/26
£0
P11D charge on relevant life insurance
Source: HMRC BIK rules
21.8%
Maximum combined NI saving vs salary equivalent
Source: HMRC NI rates 2025/26
Trusted Sources & Further Reading
This limited company life insurance guide references:
- HMRC BIM45525 — Insurance deductibility rules for limited companies
- HMRC BIM45530 — The director-shareholder trap for premium deductibility
- ABI Claims Data 2024 — £8bn in protection claims paid across the UK market
- Legal & General Technical Guide — Adviser guide to key person and relevant life structuring
- FCA Insurance Guidance — Consumer protection rights
- MyKeyManInsurance — Corporation tax worked example for limited companies
- MoneyHelper Business Insurance — Independent guidance for businesses
- GOV.UK P11D Guidance — Benefit-in-kind reporting for employee benefits
Limited Company Life Insurance FAQs
Can I pay for life insurance through my limited company?
Yes. Limited companies can pay for relevant life insurance and key person insurance directly from company funds. Relevant life premiums are always corporation tax deductible with no personal tax implications for the director. Key person premiums are deductible when protecting revenue under HMRC rules.
Is life insurance through a limited company tax deductible?
Relevant life insurance premiums are always corporation tax deductible. Key person insurance premiums are deductible when the policy protects revenue (lost profits). Shareholder protection premiums are generally not deductible. At the 25% corporation tax rate, a £100 monthly premium effectively costs £75 after tax relief on qualifying policies.
Can a one-person limited company get life insurance?
Yes. Sole directors of one-person limited companies can get both relevant life insurance (family protection) and key person insurance (business protection). You must be drawing a salary from the company for relevant life eligibility, even a small one at the NI threshold level.
What happens to company life insurance if I close my limited company?
Learn More About Your Options
Compare key person insurance information and find the right type of cover for your business.
We are a comparison and information resource, not an insurer or broker. For regulated advice, consult a qualified professional.