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Relevant Life InsuranceTax-Efficient Death in Service
Relevant life insurance is a tax-efficient life insurance policy paid for by your company. Premiums are corporation tax deductible, there is no benefit-in-kind charge (P11D), and the payout goes directly to your family outside your estate.
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Pre-Register for LaunchKey Facts: Relevant Life Insurance
Relevant life insurance is a tax-efficient way for companies to provide death-in-service benefits to directors and employees.
- -Premiums are corporation tax deductible for the company
- -No benefit-in-kind (P11D) charge for the employee
- -Payout goes directly to family via trust - outside the estate for IHT
- -No National Insurance contributions payable on premiums
- -Available for company directors, including those in one-person companies
- -Can include critical illness cover as well as life cover
How Relevant Life Insurance Works
The process is straightforward and provides significant tax advantages over personal life insurance.
1
Company Takes Out Policy
Your limited company applies for relevant life insurance on the director or employee.
2
Company Pays Premiums
Premiums are paid from company funds as a business expense - corporation tax deductible.
3
No P11D Charge
Unlike many benefits, there is no benefit-in-kind charge. No income tax or NI for the employee.
4
Policy Held in Trust
The policy is written into a relevant life trust, keeping it outside the individual's estate.
5
Family Receives Payout
If the person dies, the payout goes directly to their family - tax-free and outside the estate for IHT purposes.
Tax Advantages of Relevant Life Insurance
Relevant life insurance offers significant tax benefits compared to personal life insurance or group death-in-service schemes.
Corporation Tax Relief
Premiums are deductible as a business expense, reducing your company's corporation tax liability. At 25% corporation tax, a £100/month premium effectively costs the company £75/month after tax relief.
No P11D / Benefit-in-Kind
Unlike many employee benefits, relevant life insurance does not create a benefit-in-kind charge. The employee pays no income tax or National Insurance on the premiums paid by the company.
No National Insurance
Neither employer nor employee NI contributions are payable on the premiums. This saves 13.8% employer NI compared to paying the equivalent as salary.
Outside Estate for IHT
Because the policy is held in trust, the payout does not form part of the deceased's estate. This means no inheritance tax on the payout, regardless of estate size.
No Lifetime Allowance Issues
Unlike group death-in-service schemes through a registered pension, relevant life insurance is not subject to the pension lifetime allowance. No tax charges on large payouts.
Available for One-Person Companies
Directors of their own limited company can take out relevant life insurance on themselves. Ideal for contractor companies and personal service companies.
Relevant Life Insurance vs Other Options
Understanding how relevant life insurance compares to alternatives.
Relevant Life vs Personal Life Insurance
Key Person Insurance
Company pays premiums (corp tax deductible, no NI, no P11D). Payout via trust outside estate.
Other Product
Individual pays from taxed income. No tax relief on premiums. Payout may be in estate for IHT.
When you need it: If you have a limited company, relevant life is almost always more tax-efficient than personal cover.
Relevant Life vs Group Death in Service
Key Person Insurance
No pension lifetime allowance issues. Available for any size company. Individual policy per person.
Other Product
Part of registered pension scheme. Subject to lifetime allowance. Usually needs 3+ employees.
When you need it: Relevant life for small companies or high earners; group schemes for larger businesses.
Relevant Life vs Key Person Insurance
Key Person Insurance
Payout goes to the employee's family. It's an employee benefit - protects the individual.
Other Product
Who Can Get Relevant Life Insurance?
Relevant life insurance is available to most company directors and employees.
Company Directors
Directors of limited companies, including sole directors of one-person companies. You must be taking a salary (even a small one) from the company.
Employees
Any employee of a limited company, LLP, or partnership. Must be a genuine employee with a contract of employment.
Contractors (Ltd Company)
IT contractors, consultants, and freelancers operating through their own limited company can take out relevant life cover as a director/employee.
Partners in LLPs
Members of Limited Liability Partnerships can access relevant life insurance, with premiums treated as a business expense.
Not Available For
Sole traders and traditional partnerships cannot get relevant life insurance - it requires a limited company or LLP structure. Self-employed individuals should consider personal life insurance instead.
Relevant Life Insurance FAQs
What is relevant life insurance?
Relevant life insurance is a tax-efficient life insurance policy taken out by a company on a director or employee. The company pays the premiums (corporation tax deductible), there is no benefit-in-kind charge for the individual, and the payout goes to their family via a trust - outside their estate for inheritance tax purposes.
Is relevant life insurance tax deductible?
Yes, relevant life insurance premiums are corporation tax deductible for the company. Additionally, there is no P11D (benefit-in-kind) charge for the employee, no National Insurance contributions are payable, and the payout is not subject to inheritance tax as it is held in trust.
Can a sole director get relevant life insurance?
Yes, directors of one-person limited companies can take out relevant life insurance on themselves. You must be taking a salary from the company (even a small one) to qualify. This makes it ideal for contractors, consultants, and freelancers operating through their own limited company.
What is the difference between relevant life insurance and key person insurance?
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.