Last reviewed and updated by Darren Shepherd: October 2026
If you are a director of your own limited company, your company can usually pay for your life insurance through something called a relevant life plan. The company owns the policy and pays the premium, which is normally allowed against corporation tax. It is not a benefit in kind, so you pay no extra income tax or National Insurance on it, and the payout goes into a trust for your family.
For a higher rate director, that can mean the same cover uses around half the company profit it would take to pay for it personally. For a basic rate director the saving is smaller, roughly a quarter to a third.
It is life cover only (plus terminal illness), it is not available to sole traders or equity partners, and it has to be set up correctly to get the tax treatment.
Watch: relevant life plans explained, in about two minutes
Most limited company directors pay for their life insurance the same way everyone else does, from their own bank account. The trouble is, by the time that money reaches your bank account it has already been taxed twice. Once as corporation tax in the company, and again as dividend tax when you take it out.
A relevant life plan is a way of paying for the same protection from the company instead, before most of that tax is taken. It is not new and it is not a loophole. It has been around since 2006, it is built on specific HMRC rules, and almost every major UK insurer offers one. Yet most small company directors have never heard of it.
This page explains what it is, who can have one, how much you could save at this year's tax rates, and the questions to ask before you do anything.
What is a relevant life plan?
A relevant life plan is a life insurance policy that your limited company takes out on you, as an employee or director. Think of it as a one person version of the death in service benefit that employees of big companies get as standard.
Here is how the pieces fit together:
- The company is the policyholder and pays the premiums.
- You are the person insured.
- A trust is set up at the start, and if you die, the insurer pays the money to the trust.
- Your family (or whoever you choose as beneficiaries) receive the money from the trust. The business never gets it.
If you are diagnosed with a terminal illness, most policies will also pay out early.
Why it can cost so much less
The saving comes from where the money is paid from. Compare the two routes:
| Paying personally | Relevant life plan | |
|---|---|---|
| Who pays | You, from your own money | Your limited company |
| Money comes from | Dividends or salary you have already been taxed on | Company profit, before corporation tax |
| Corporation tax relief | None | Normally yes, as a business expense |
| Dividend or income tax on the money used | Yes | No |
| Benefit in kind (P11D) | Not applicable | Not normally, so no tax or NI on the premiums |
| Where the payout goes | Your estate, unless you put it in trust | Into a trust for your family |
| Counts towards pension allowances | No | No |
A worked example at 2026/27 tax rates
Let's say the life cover you want costs £100 a month, so £1,200 a year. Here is what it really takes to pay for it from your own net income, compared with your company paying it.
Paying it yourself: following the money
Most directors take a small salary and the rest as dividends. So to have £1,200 in your own account to pay the premium, the money has to make this journey:
| Step | Basic rate director | Higher rate director |
|---|---|---|
| Premium you need to pay each year | £1,200 | £1,200 |
| Dividend tax rate on that money | 10.75% | 35.75% |
| Dividend the company must pay you | £1,345 | £1,868 |
| Dividend tax you pay | £145 | £668 |
| Corporation tax the company pays first (at 19%) | £315 | £438 |
| Company profit needed | £1,660 | £2,306 |
| Total tax paid just to fund your cover | £460 | £1,106 |
Paying it through a relevant life plan
| Step | Basic rate director | Higher rate director |
|---|---|---|
| Premium the company pays each year | £1,200 | £1,200 |
| Dividend needed | None | None |
| Dividend tax | £0 | £0 |
| Benefit in kind tax or National Insurance | £0 | £0 |
| Company profit needed | £1,200 | £1,200 |
| Corporation tax the company saves (at 19%) | £228 | £228 |
The difference, side by side
| Basic rate director | Higher rate director | |
|---|---|---|
| Company profit needed if you pay personally | £1,660 a year | £2,306 a year |
| Company profit needed through a relevant life plan | £1,200 a year | £1,200 a year |
| Extra profit swallowed by tax if you pay personally | £460 a year | £1,106 a year |
| Over a 20 year policy | £9,198 | £22,116 |
| Saving | About 28% | About 48% |
Put simply, for every £100 of premium, a basic rate director paying personally needs the company to earn about £138. A higher rate director needs about £192. Through a relevant life plan, it is £100.
If your company pays corporation tax at 25%, the gap gets wider. A basic rate director then needs about £1,793 of profit a year to pay personally (a 33% saving through the company), and a higher rate director about £2,490 (a 52% saving).
Taking it as salary instead of dividends does not help either. A higher rate director paying 40% income tax and 2% employee National Insurance, with the company paying 15% employer National Insurance on top, needs the company to find around £2,380 to get £1,200 into their account.
These are illustrations, not quotes. Your own figures depend on your tax position, how you take money from the company, and whether HMRC accepts the premium as a business expense for your company.
Who can have a relevant life plan?
There has to be a genuine employer and employee relationship, because the rules are built around employee benefits. That means:
- Yes: directors and employees of a UK limited company, including a one person company where you are the only director.
- Yes: employees of sole traders and partnerships (but not the owners themselves).
- No: sole traders, equity partners in a partnership, and equity members of an LLP.
You need to be a UK resident employee of a UK employer, and within the insurer's age limits. Most will start a policy up to your early 70s, and the cover has to end by your 75th birthday.
Your husband, wife or partner can only be covered if they are genuinely employed by the company and the cover is in line with what they do and earn.
How much cover can you get?
There is no fixed limit set in law. Instead, insurers work out a maximum as a multiple of your total remuneration, and that is where relevant life plans suit directors well. Most insurers count your salary, regular dividends, bonuses and benefits in kind, not just the small salary many directors pay themselves.
| Your age when the policy starts | Typical maximum (varies by insurer) |
|---|---|
| Under 30 | 25 to 35 times total remuneration |
| 30 to 39 | 25 to 30 times |
| 40 to 49 | 25 times |
| 50 to 59 | 20 times |
| 60 and over | 15 times |
So a 45 year old director taking a £12,570 salary and £40,000 of dividends could, in theory, have cover of up to around £1.3 million. Whether that much cover is right for you is a different question, and one to work through with an adviser.
What a relevant life plan does not do
This is where people get caught out, so it is worth being clear.
- It is life cover, not critical illness cover. One insurer, Aviva, offers a limited "employee significant illness" option, but it covers fewer conditions than normal critical illness cover and only pays if the illness means you have to retire.
- It has no cash in value. It is pure protection. If you stop paying, the cover stops and you get nothing back.
- It cannot protect the business. It is for your family. If you want to cover the company against losing you, or to fund buying out a fellow shareholder, that is key person cover or shareholder protection, which is a different thing.
- It is tied to your job. The company owns it. If you sell the company, close it, or stop being employed by it, the cover normally ends unless the insurer lets a new employer take it on.
- It does not replace income protection. If you are off sick for months, a relevant life plan pays nothing.
Why this matters more from April 2027
From 6 April 2027, most unused pension funds and pension death benefits will be counted as part of your estate for inheritance tax. Death in service benefits paid from a registered pension scheme have been carved out of that change.
A relevant life plan is not a pension at all, so it is not part of that change. The payout goes through a trust, which is designed to keep it outside your estate. If you have been relying on your pension to look after your family when you die, it is a good moment to look at the whole picture, including how your life cover is set up.
Getting the set up right
The tax treatment does not come from the name on the policy. It comes from the policy meeting HMRC's conditions and being set up properly. The main points:
- The company must be the policyholder and pay the premiums.
- The policy has to be written into the right kind of trust from day one. Each insurer has its own relevant life trust.
- The cover needs to be reasonable for your role and remuneration. A very large policy on a part time director with a small income is the kind of thing that draws questions.
- Your accountant should be happy that the premium meets the "wholly and exclusively for the purposes of the trade" test, so it can be claimed against corporation tax.
- The insurer still underwrites you in the normal way, asking about your health, lifestyle and income.
Already have personal life cover?
You do not have to choose one or the other. Plenty of directors keep a personal policy and add a relevant life plan, or move some of their cover across over time.
The golden rule is simple. Never cancel an existing policy until a new one is fully in place. Your health may have changed since you took out your old policy, and a new policy will be priced on your health today. Sometimes keeping what you have is the better answer, and a good adviser will tell you that.
Questions to ask yourself
- Am I a director or employee of my own limited company?
- Am I paying for my life cover personally, out of dividends or salary?
- Am I a higher rate taxpayer, or close to it?
- If I died tomorrow, how much would my family actually need, for the mortgage, debts and day to day living?
- Do I have death in service through anything else, and how much?
- Has anyone ever shown me personal cover and company paid cover side by side?
If you answered yes to the first two, it is worth a conversation.
1. Does my company qualify, and am I a genuine employee of it?
2. Will the premiums be allowed against corporation tax for my company?
3. How much cover would my family need, and what is the maximum I can have?
4. Should this replace or sit alongside my existing cover?
5. What happens to the cover if I sell or close the company?
6. Do I also need critical illness cover or income protection?
The bottom line
If you run your own limited company and pay for your life cover personally, you are very likely paying for it the expensive way. A relevant life plan will not be right for everyone, but it is one of the simplest and most overlooked ways for a director to protect their family more efficiently.
A relevant life plan looks after your family if you die. If you also want to protect your income while you are alive but unable to work, read the guide to executive income protection, the other policy your company can pay for. Read the guide to executive income protection
Speak to your accountant about the tax side, and to a good protection adviser about the cover itself. If you would like an introduction to one, there is a link below.