Can Your Limited Company Pay for Your Life Insurance? | Talk To O'Malley
Can Your Limited Company Pay for Your Life Insurance?
"Can my limited company actually pay for my life insurance?" — one of the most common questions I get from directors. For years
the assumption was that life cover is purely a personal expense, paid from post-tax salary. Under current UK rules, there's a more
efficient route: Relevant Life Cover.
What It Actually Is
Relevant Life Cover is an individual life insurance policy, set up by your limited company to cover you as an employee and director.
The business owns and pays the premiums. If the worst happens while you're employed by the company, a tax-free lump sum is
paid to your family or loved ones via a discretionary trust.
It's pure protection — no investment element, no cash-in value.
Why Route It Through the Company
Personal life insurance is paid from money that's already been through Corporation Tax once, and your personal income tax and
National Insurance again on the way to you. When the company pays directly instead:
Corporation Tax relief — premiums are normally an allowable business expense.
No Benefit-in-Kind charge — correctly structured, it doesn't trigger a P11D charge.
No National Insurance — neither you nor the company pays NI on the premiums.
Combined, this typically makes company-paid cover meaningfully cheaper than the equivalent personal policy — the exact figure
depends on your tax band and the company's Corporation Tax rate, so it's worth having modelled against your own numbers rather
than assumed from a generic percentage.
Who Actually Qualifies
HMRC sets clear boundaries to keep this genuinely tied to employment rather than disguised remuneration.
Qualifies: - UK-resident employees and directors on the company's PAYE payroll. - Salaried partners, in certain business
structures.
Doesn't qualify: - Sole traders — no separate legal entity from the business, so the mechanism doesn't apply. - Traditional partnership owners taking drawings rather than a PAYE salary. - Non-employed shareholders — no active work, no PAYE
salary, no eligibility.
If you run a UK limited company and draw a salary, you're generally in a good position to use this.
What HMRC Requires the Policy to Look Like
To stay compliant, a Relevant Life policy generally needs to:
Be a pure life policy — death or terminal illness only, no critical illness or investment features attached.
Pay out as a lump sum, not as ongoing income.
End before you turn 75.
Sit under a proper discretionary trust.
Have a premium that's reasonable relative to your actual salary and role.
What Happens When a Claim Is Made
Tax-free payout — paid into the discretionary trust, generally free of income tax, capital gains tax, and National Insurance.
Outside your estate — because it's written in trust, the payout normally sits outside your personal estate for Inheritance Tax
purposes.
Independent of pensions — doesn't count against your annual or lifetime pension allowance.
Worth Pairing With
Relevant Life Cover protects your family if you die while employed by the company. If you also want your income protected while you’re alive but unable to work, that’s a different product — Executive Income Protection.
How I Set This Up
A conversation about your cover amount and company budget, with tailored recommendations.
The paperwork handled — trust setup and company payment structuring, done correctly from the start.
Confirmation everything's HMRC-compliant before anything's signed.
Want to know if your company qualifies?
Talk To O'Malley Financial Services is a trading style of Commercial Connect Limited, authorised and regulated by the Financial Conduct Authority (FCA No. 1021324). This content is for information only and does not constitute financial advice. Policies have terms and conditions and may not pay out in all circumstances. Tax treatment depends on individual circumstances and may change.
