How Does HMRC Treat Relevant Life Insurance?

When you buy Relevant Life Insurance through your limited company, your business owns the policy and pays the premiums. Although owned by your company, the policy provides life cover on an individual basis for yourself.

Since you’re paying for the policy with company funds, it’s similar to (and replicates) Death In Service schemes. However, rather than covering a group of employees, it protects you as an individual.

How HMRC Taxes Relevant Life Insurance?

The good news is that Relevant Life Insurance actually offers tax advantages, so you needn’t worry about creating additional tax by getting a policy.

Relevant Life cover is not treated as a P11D / Benefit In Kind, so you won’t pay any additional Income Tax or National Insurance on the benefit.

The premiums paid by your limited company receive tax relief, as they are classed as an allowable business expense. You’ll receive a lower corporate tax bill as a result.

How Is The Relevant Life Insurance Payout Taxed?

The benefit is paid tax free. Your policy is typically set up using a discretionary trust, so it doesn’t form a part of your estate. This means that if you pass away, the policy payout isn’t subject to inheritance tax. Your loved ones can therefore get access to it faster, without having to go through probate.

Writing the policy into a trust keeps it separate from your business and your estate. Doing this means there are no tax implications if you pass away because the money doesn’t go back into your company.

The payout received is free from Income Tax, National Insurance, and Capital Gains Tax.

Relevant Life Insurance Savings Example

As your policy is paid for via your limited company, the taxation differs from a personal Life Insurance policy. Below is a table of the tax savings an individual can make with Relevant Life cover.

Example Relevant Life Savings

*By paying for Relevant Life cover through your company, you can save 37% on your corporation tax bill. Savings calculated using Royal London’s Relevant Life Calculator.