Running a business means wearing a lot of hats and managing money efficiently is one of the most important. Between profits, pensions and benefits, directors have plenty to think about.
But when it comes to life insurance, thousands of directors let the ball slip – they’re still paying personally, completely unaware that putting their policy through their limited company is more tax efficient.
Financial experts say relevant life insurance has become one of the most overlooked toolsfor directors and small business owners. It offers the same personal protection as a standard life insurance policy but with big tax advantages.
A smarter way to pay for protection
When you buy life insuranceas an individual, you pay the premiums out of your own pocket after income tax and National Insurance.
For a higher-rate taxpayer, that means a £100 monthly premium could actually cost closer to £180 once tax is factored in.
Relevant life insurance works differently. The policy is paid for by the business, and the premiums are usually treated as an allowable business expense for corporation tax purposes. In other words, your company pays and you save.
“Relevant life cover lets directors get life insurance in a far more tax-efficient way,” explains IGotCover, a UK-based life insurance brokerage that specialises in helping limited companies.
“The premiums can typically be claimed as a business expense, and unlike some benefits, there’s no National Insurance or benefit-in-kind charge for the individual.”
What makes it different
Relevant life insurance is designed specifically for limited company directors and employees, even if they’re the only person on the payroll.
It provides a tax-free lump sumto your nominated beneficiaries if you pass away (or are diagnosed with a terminal illness while the policy is active). But because it’s owned and paid for by the company, it’s set up under a trust, ensuring the payout goes directly to your loved ones, not into the business or your estate – this can also potentially help with inheritance tax liabilities.
According to IGotCover, that makes it ideal for small business owners who don’t have access to a traditional “death in service” benefit like larger employers offer, but still want to protect their families in the same way.
Why it’s growing in popularity
Advisers report a steady rise in directors switching to relevant life policies, largely due to increasing tax awareness, as well as tighter budgets among SMEs.
“For many, it’s a simple decision once they understand the numbers,” says IGotCover. “It’s the same cover, the same peace of mind, just structured in a smarter, more tax efficient way.”
In practice, a director paying £100 a month personally could save around 30-40% by running the policy through their company. For some, that’s hundreds of pounds a year in savings without reducing their level of cover.
The bottom line
Savvy company directors know that being smart with money isn’t just about profit, it’s about how you protect yourself, too.
Relevant life insurance is one of those quiet, practical solutions that makes running a business feel just a little bit smarter.
To learn more about how relevant life cover could work for your company or to get a free quote and comparison, visit IGotCover.
