Relevant life insurance for company directors (UK 2026)
A relevant life policy lets your limited company pay for individual life cover on a director or employee in a tax-efficient way — like a one-person death-in-service scheme. Here is how it works in 2026, how it compares with personal cover, who qualifies and where the limits sit. Information only, not advice.
Relevant life insurance for directors, in brief
- What it is: a single-life term policy your limited company takes out and pays for on a director or employee — a tax-efficient, individual version of death-in-service cover.
- Tax treatment: premiums are normally an allowable business expense (so usually corporation-tax deductible), are not treated as a P11D benefit-in-kind, and carry no income tax or National Insurance for the director.
- The payout: the policy is written in a discretionary trust, so the lump sum is usually paid free of inheritance tax to the director’s family.
- The limits: single life only, protection not investment, no critical-illness option, and cover must usually cease before age 75.
Relevant life plan vs a personal life policy
| Feature | Relevant life plan | Personal life policy |
|---|---|---|
| Who pays the premium | The company, as the employer | You, from after-tax income |
| Corporation tax | Premiums are usually an allowable business expense | No business deduction |
| Benefit in kind (P11D) | Not normally treated as a benefit-in-kind | Not applicable — paid personally |
| Income tax & National Insurance | None on the premiums for the director | Paid from income already taxed |
| Payout & trust | Written in trust, usually inheritance-tax free to family | In trust only if you arrange it |
| Cover type | Single-life term, protection only | Term or whole-of-life options |
| Critical illness | Not available on a relevant life plan | Can often be added |
| Maximum age | Cover must usually end before age 75 | Varies by product |
Indicative comparison for orientation only — tax treatment depends on your circumstances and HMRC’s discretion. Not a quote.
How relevant life insurance works for directors
A relevant life policy is owned and paid for by your limited company but covers the life of an individual employee — and a company director who draws a salary counts as an employee for this purpose. If the insured person dies (or is diagnosed with a terminal illness) during the term, a lump sum is paid through a discretionary trust to their family or financial dependants. In effect it gives a single director the kind of death-in-service benefit that larger firms provide through a group scheme.
It is most often used by small and contractor companies that are too small for a group life scheme, which typically need several lives to set up. Cover is usually based on a multiple of the director’s remuneration, and some insurers will consider dividends alongside salary when setting the maximum sum assured. Because it is a protection policy, it has no surrender value and no investment element. For the wider picture on cover types and amounts, see the life insurance hub and our guide to how much life insurance you need.
The tax efficiency behind a relevant life plan
The appeal is that the company pays the premium from gross income rather than the director paying from income that has already been taxed. The premium is normally an allowable business expense, so it can reduce the company’s corporation-tax bill, and there is generally no National Insurance, no income tax and no P11D benefit-in-kind on it for the director. For a higher or additional-rate taxpayer, the effective cost of the same cover can therefore be noticeably lower than buying it personally.
Corporation-tax relief depends on the company’s profits — in 2026 the UK main rate is 25% with a 19% small-profits rate below £50,000 and marginal relief in between — and on the premium being incurred wholly and exclusively for the trade, which is ultimately at HMRC’s discretion. The trust arrangement is what keeps the payout outside the director’s estate for inheritance tax and out of the lifetime-allowance/pension framework. None of this is a substitute for tailored tax advice from your accountant.
Who relevant life cover suits — and who it does not
Relevant life insurance fits limited-company directors, contractors and small businesses that want individual life cover paid through the company. Because the insured must be an employee of the business, a sole trader or an equity partner who is not on the payroll generally cannot use it for their own cover — they would look at a personal policy instead. Cover must usually cease before age 75, there is no critical-illness option, and the policy ends if the employment relationship ends, though it can often be ported to a new arrangement.
If you want cover that lasts for life or includes an investment element, a relevant life plan is not the right tool — compare the structures in our guide to term vs whole-of-life insurance. To weigh personal versus company-paid cover for your situation, the calm, factual starting point is the life insurance hub.
Relevant life insurance for directors: FAQs
Information only — not financial, tax or legal advice. My Insurance Expert is not an FCA-authorised intermediary and does not arrange or sell policies. Tax treatment depends on your individual circumstances and may change; confirm with your accountant or an authorised adviser. Figures are indicative and not a quote. Last updated: 2026-06-18
More Life Insurance pages
- How much do I need
- Term vs whole of life
- Pre-existing conditions
- Life insurance for diabetics
- Life insurance over 65
- Over-50s, no medical
- Joint vs single
- Life insurance over 60
- Cost by age
- No medical exam
- Life insurance for smokers
- Mortgage life insurance
- Life insurance over 70
- Life insurance for parents
- Over-50s life insurance cost
- What is life insurance?
- Get a life insurance quote
- Life insurance