This is a question I get a lot from directors.
On the face of it, it feels simple:
“My company has money. I need life insurance. Can the company just pay for it?”
Sometimes yes. Often no. And the difference matters — because it affects:
- whether the company gets Corporation Tax relief, and
- whether you get a tax bill personally.
Let’s keep this simple.
First things first: not all life insurance is the same
When people say “life insurance”, they’re usually talking about one of two very different things — and HMRC treats them very differently.
1️⃣ The tax-efficient option: a Relevant Life policy
This is the one most directors are actually looking for, even if they’ve never heard the name before.
A Relevant Life policy is basically:
life insurance provided by a company, for a director or employee, done properly.
When it’s set up correctly:
✅ The company can claim tax relief on the premiums
✅ No benefit in kind for you
✅ No Income Tax or NIC for you personally
✅ The payout goes to your family, not the company
In other words: clean, simple, and tax-efficient.
What makes a policy a “Relevant Life” policy?
To qualify, it has to tick a few boxes:
- It only pays out if you die (or are terminally ill), no savings element, no cash value
- The money doesn’t go to the company, it goes to your family via a trust
- It exists because you’re a director or employee, not for personal financial planning
- The company pays the premiums as part of employing you
If those conditions are met, HMRC accepts this as a genuine business cost — not a personal perk.
Does the policy need to be in the company’s name?
This often surprises people.
For Relevant Life policies:
- the policy is usually in your name, not the company’s
But it’s:
- arranged by the company
- paid for by the company
- set up so the company never benefits from it
That structure is deliberate — and it’s what keeps the tax treatment clean.
The expensive mistake: personal life insurance paid by the company
This is where things often go wrong.
If your company pays for:
- your personal life insurance, or
- a policy linked to your mortgage, or
- something you’d have taken out anyway personally
then HMRC sees this as:
“the company paying a personal bill for you”.
That usually means:
❌ no Corporation Tax relief for the company
❌ a benefit in kind on you
❌ Income Tax for you
❌ Class 1A NIC for the company
In short: everyone pays more tax, for no good reason.
What about “key person” or business insurance?
This is different again.
If the policy:
- pays out to the company, and
- exists to protect the business if you die
then:
- it’s not a personal benefit, so no benefit in kind
- tax relief for the company depends on why the policy exists
That’s a separate conversation — and it’s not a Relevant Life policy.
A quick, plain-English summary
| Situation | Tax-efficient? | Benefit in kind? |
|---|---|---|
| Proper Relevant Life policy | ✅ Yes | ❌ No |
| Personal life insurance paid by company | ❌ No | ✅ Yes |
| Business / key person cover | Depends | ❌ No |
The big takeaway
If you want your company to pay for life insurance properly, the solution isn’t:
“Let’s just put it through the company and see what happens”.
It’s:
“Let’s set up the right type of policy, in the right way, for the right reason”.
Get that wrong, and HMRC will happily reclassify it later — usually with tax, NIC and interest attached.
Get it right, and it’s one of the simplest, cleanest planning wins available to director-run companies.
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