Relevant Life Insurance Tax Benefits
1. Corporation Tax Relief on Premiums
Premiums paid for a Relevant Life policy are usually treated as an allowable business expense. This means they can be offset against your corporation tax bill, reducing the overall cost to the company.
2. No Income Tax or National Insurance on Premiums
Unlike many employee benefits, premiums aren’t considered part of the employee’s salary. As a result:
The employee doesn’t pay income tax on the premiums.
The employer doesn’t pay National Insurance contributions on them.
This creates savings for both sides.
3. Tax-Free Payouts, Outside the Estate
If the worst happens, a Relevant Life policy pays out a tax-free lump sum to the employee’s chosen beneficiaries. Importantly, the benefit is written into trust—so it usually sits outside of the employee’s estate for inheritance tax purposes.
4. Not a Benefit-in-Kind
Relevant Life Insurance is not classed as a benefit-in-kind. This means:
Employees won’t face an additional personal tax charge.
The policy delivers genuine peace of mind, without any hidden tax implications.
Relevant Life Insurance vs. Standard Life Insurance
| Feature / Tax Treatment | Relevant Life Insurance | Standard Life Insurance / Personal Policy |
|---|---|---|
| Corporation tax relief on premiums | ✅ Usually allowable as a business expense | ❌ No corporation tax relief (personal cover is paid from net income) |
| Income tax on premiums | ❌ No income tax liability for employee | ✅ Premiums usually treated as personal income if paid by employer |
| National Insurance on premiums | ❌ No employer or employee NI contributions | ✅ NI contributions apply if treated as a benefit |
| Payouts | ✅ Tax-free lump sum, paid via trust | ⚠️ May form part of estate and be subject to inheritance tax |
| Benefit-in-kind treatment | ❌ Not treated as a benefit-in-kind | ✅ Often classed as a benefit-in-kind, increasing personal tax |
| Impact on employee’s personal tax | ❌ No effect | ✅ Premiums may increase taxable income |
| Inheritance tax position | ✅ Outside employee’s estate if in trust | ⚠️ Can fall inside estate if not written in trust |
For SMEs and directors, Relevant Life Insurance provides the protection employees need—while being one of the most tax-efficient ways to fund life cover. It helps reduce company costs, avoid unnecessary tax, and ensures families receive the full benefit.
The Smart, Tax-Efficient Solution
In short, Relevant Life Insurance transforms company-paid life cover into meaningful financial savings—for both your business and your people. It’s a tax-efficient way to provide valuable protection while managing costs effectively.
All statements about tax treatment are based on Broadbench’s understanding of current UK tax law and HM Revenue & Customs’ practice. Tax rules may change, and the exact impact will depend on your business’s circumstances.
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