Why Your Limited Company Should Pay for Your Life Insurance | Talk To O'Malley
Why Your Limited Company Should Be Paying For Your Life Insurance
I talk to directors every week who are paying for their own life insurance out of their personal bank account, without realising there's a more efficient way to do it.
If you're funding your premium from salary or dividends, you're paying for it with money that's already been taxed once by the business and again on the way to you personally. There's a legitimate, HMRC-recognised way round that: Relevant Life Cover.
Why Paying Personally Costs You More Than It Should
Standard personal life insurance is paid from money you've already extracted from the company as salary or dividends — which means income tax and National Insurance have taken a bite before the premium is even paid. As a higher-rate taxpayer, you can need meaningfully more in gross salary than the actual premium cost, just to clear the tax on the way through. That's an invisible surcharge on protection that has nothing to do with the cover itself — purely how the money is routed to pay for it.
Relevant Life Cover: The Company-Paid Alternative
Relevant Life Cover is a death-in-service style benefit, arranged and paid for by your limited company on you as an employee or director. Instead of extracting salary to fund a personal policy, the company pays the premium directly.
The premium is normally treated as a deductible business expense, reducing Corporation Tax.
Correctly structured, it doesn't trigger a Benefit-in-Kind (P11D) charge for you personally.
You get the same cover, funded a more efficient way.
Where the Saving Actually Comes From
For a higher-rate taxpayer, routing a policy through the company rather than paying personally typically means: no income tax or National Insurance is paid on the premium, and the company gets Corporation Tax relief on the cost.
Run together, that can add up to a substantial saving compared with paying personally — commentators in this space often put a higher-rate taxpayer's saving somewhere close to half, though the real number depends on your tax band, your company's profit level, and current Corporation Tax rates. It's worth having this modelled against your actual numbers rather than taking a headline figure at face value — I'm happy to run it for your specific situation.
Other Advantages Worth Knowing
Corporation Tax relief on premiums, when structured correctly.
No Benefit-in-Kind charge, unlike most company perks.
No National Insurance — employer or employee — on the premiums.
Inheritance Tax efficiency — written into a discretionary trust, the payout is normally kept outside your estate.
Sits outside pension allowances — doesn't eat into your annual or lifetime allowance.
Fits Alongside Other Protection
Relevant Life Cover is specifically for death-in-service benefits. Depending on your situation, it's also worth looking at:
Executive Income Protection — replaces a meaningful share of your income if illness or injury stops you working.
Key Person Cover — protects the company's cash flow if a key revenue-generator is lost.
Shareholder Protection — funds a share buyback so surviving owners keep control.
How I Set This Up
A quick, jargon-free chat about your family's protection needs and the company's structure.
Tailored quotes, compared across the market.
The trust paperwork handled, coordinated with your accountant so the company payment and tax treatment are set up correctly from day one.
Want to find out whether Relevant Life Cover could save your business money?
Frequently Asked Questions
Can my limited company pay for my life insurance?
If you’re a director or employee of a UK limited company, you may be eligible for Relevant Life Cover. Eligibility depends on your circumstances and how the policy is arranged.
Why is Relevant Life Cover often more tax-efficient?
When structured correctly, premiums are usually paid by the company rather than from your personal post-tax income. This can make it a more efficient way to arrange life insurance for many directors.
Does Relevant Life Cover replace personal life insurance?
Not necessarily. Relevant Life Cover is designed specifically for directors and employees of limited companies and may form part of your wider financial protection planning.
How much does Relevant Life Cover cost?
The cost depends on factors such as your age, health, level of cover and your business circumstances. A tailored quote can help you understand the options available.
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.
