The short answer
Relevant Life Assurance provides tax-efficient life cover for employees or directors on an individual basis. It works in a similar way to a death-in-service benefit, but it is available as a standalone policy — which makes it well suited to small businesses and company directors who do not have access to a group scheme.
Key features
- Life cover for an individual employee or director
- A single-employee solution — there is no need to set up a group scheme
- The policy is written into trust, so the benefit can be paid quickly and tax-efficiently
- Suitable for directors, employees and businesses wanting tailored benefits
Tax efficiency and financial benefits
Why Relevant Life cover is highly tax-efficient
Relevant Life Assurance offers significant tax advantages compared with life cover paid for personally. When an employee pays for life insurance themselves, the premium comes out of post-tax income — which has already been reduced by:
- Income Tax
- Employee National Insurance
- Additional Employer National Insurance on the grossed-up salary
With a Relevant Life policy:
- The premiums are paid by the business
- Premiums are usually treated as an allowable business expense
- Corporation Tax relief reduces the net cost further
- There is no Benefit-in-Kind charge for the employee
Outcome: for many directors and higher-rate taxpayers this can create savings of up to around 49% compared with paying for the same life cover personally.
Important
Tax treatment depends on the individual circumstances of the business and the employee and can change in the future. Premiums are usually, but not automatically, an allowable business expense — confirmation should be sought from the company's accountant. We do not provide tax or accountancy advice.
Why it is ideal for directors and business owners
Directors and small business owners often look for efficient ways to protect their families while reducing unnecessary tax exposure. Relevant Life Assurance is particularly suitable because:
- It enables directors to receive personal life cover funded by the business
- Premiums do not affect pension annual or lifetime allowances
- Policies are written into trust, helping avoid inheritance tax on the payout
- It provides a valuable benefit without creating a Benefit-in-Kind liability
Additional business advantages
- Helps recruit and retain employees through high-value benefits
- Suitable for businesses too small for group life schemes
- Provides flexible, portable cover if employment circumstances change
Summary
Relevant Life Assurance is one of the most tax-efficient ways for directors and businesses to provide meaningful financial protection, combining compliance, tax savings and robust family security.
How we can help
We look at the cover alongside the wider picture — existing death-in-service benefits, personal policies, the mortgage and family needs — so the arrangement is set up correctly, written in trust from the outset and reviewed as the business changes. Existing cover should never be cancelled until any replacement has been accepted and placed on risk.
Glossary
| Term | What it means |
|---|---|
| Relevant Life Assurance | An individual life insurance policy taken out and paid for by a business for the benefit of an employee or director and their family. |
| Death-in-service benefit | Life cover provided through employment, usually as a multiple of salary, traditionally via a group scheme. |
| Trust | A legal arrangement that holds the policy so the benefit can be paid to the intended people quickly and outside the estate. |
| Allowable business expense | A cost the business can normally set against its profits, reducing the Corporation Tax it pays. |
| Corporation Tax relief | The reduction in tax the company pays because the premium is treated as a business cost. |
| Benefit-in-Kind | A taxable perk provided by an employer. Relevant Life premiums are not normally treated as one. |
| Annual and lifetime allowance | Pension limits on contributions and benefits. Relevant Life premiums do not normally count towards these. |
| Inheritance tax | Tax that can apply to an estate on death. A policy written in trust normally sits outside the estate. |
| Portability | The ability to continue cover if you leave the business, subject to the insurer's terms. |
Important information
This guidance is for general information only and does not constitute personal advice, tax advice or accountancy advice. My Mortgage & Protection Experts Ltd is an Appointed Representative of King Mortgages Ltd, which is authorised and regulated by the Financial Conduct Authority. My Mortgage & Protection Experts Ltd FCA reference 937076; King Mortgages Ltd FCA reference 803561.
This guide is for informational purposes only and was accurate at the date of publication. Please seek personalised advice before making financial decisions.
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