⚠️ Senior Editor's Note: A "Relevant Life Plan" (RLP) is a specialized term assurance policy designed for company directors and employees. Crucially, it must be written into a Discretionary Trust to ensure the payout remains separate from the company's assets and free from Inheritance Tax. It is NOT available to Sole Traders.
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| Director of a Ltd Company? |
If you run your own Limited Company in the UK, managing tax liabilities is a constant challenge. You deal with Corporation Tax, Dividend Tax, and Income Tax on a daily basis.
However, when it comes to family protection, many directors are making a significant financial oversight.
Most company directors fund their Life Insurance premiums via their personal bank account (using post-tax income). This is the most expensive method available.
There is a far more tax-efficient vehicle known as a "Relevant Life Plan" (RLP). This structure allows your Limited Company to pay the premiums on your behalf. HMRC typically treats these payments as a deductible business expense, yet the payout remains tax-free for your beneficiaries. In this guide, we demonstrate how to reduce the effective cost of your premiums by nearly 50%.
Paying with "Expensive" Money
To fund a £100 monthly premium from your personal pocket, you must first generate significantly more revenue within your company.
- First, the company pays Corporation Tax (up to 25% depending on profits).
- Next, you pay Dividend Tax or Income Tax to extract those funds.
- Finally, you pay the insurer with what is left.
In reality, that £100 premium could cost your business £150 or more in gross earnings.
Relevant Life Plan
A Relevant Life Plan acts as a "Death in Service" benefit for an individual. It effectively shifts the financial burden to the business.
- Company Pays: Premiums are debited directly from the business bank account.
- Tax Deductible: Premiums are generally considered a legitimate business expense, reducing your Corporation Tax bill.
- No Benefit-in-Kind: Unlike private medical insurance, RLP premiums are NOT treated as a taxable P11D benefit for the employee.
Save Up To 49%
Let's compare the effective cost for a Higher Rate taxpayer director paying a £100/month premium in 2026.
| Cost Breakdown | Personal Life Policy | Relevant Life Plan |
|---|---|---|
| Premium Cost | £100 | £100 |
| Corporation Tax Relief (25%) | £0 | -£25 (Saving) |
| Income/Dividend Tax Paid | +£50 (Approx) | £0 |
| Net Cost to Business | ~£150+ | £75 |
By switching to an RLP, you are essentially securing the same level of cover for half the effective cost.
Keeping it Tax-Free
This is the technical but critical component. An RLP must be written into a Discretionary Trust from inception.
Why is this necessary? If a claim is made, the payout enters the Trust, bypassing the company. The Trustees (typically you, your fellow directors, or family members) then distribute the funds to the beneficiaries (your spouse/children).
Because the funds never enter the company's accounts and do not form part of your personal estate, the payout is generally exempt from:
- Income Tax
- Inheritance Tax (IHT)
Eligibility Criteria
Relevant Life Plans are strictly available to:
- Directors of Limited Companies
- Salaried Employees of Limited Companies
Sole Traders are not eligible. If you are self-employed as a Sole Trader, you must continue with personal policies, as there is no legal distinction between you and your business.
Chief Editor’s Verdict! A No-Brainer for Directors
If you own a Limited Company and are paying for life insurance personally, it is time to reconsider. You are voluntarily overpaying tax.
Your Action Plan
1. Consult a specialist broker regarding "Relevant Life Plans."
2. Calculate your potential Corporation Tax savings based on your 2026 profit projections.
3. Ensure the Trust is established correctly (your broker will provide the necessary deeds) to protect your family's inheritance.
Let the business absorb the cost while you enjoy the peace of mind.
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