Relevant Life Insurance
A Relevant Life policy is a tax-efficient life insurance plan that allows a company to provide death-in-service benefits to an individual director or employee. The premiums are paid by the business, the policy is written in a discretionary trust for the employee’s family, and the arrangement qualifies for significant tax advantages, making it considerably more cost-effective than a personal life insurance policy for many directors and high earners.
How Relevant Life Works
- The employer takes out the policy and pays the premiums
- Premiums are typically treated as a business expense and qualify for corporation tax relief
- The premiums do not count as a P11D benefit in kind for the employee
- The policy is written in trust, meaning the payout goes directly to the beneficiaries without forming part of the estate, avoiding inheritance tax
Who Is It For?
Relevant Life is particularly valuable for:
- Company directors who want life cover paid for through the business rather than from post-tax personal income
- High earners whose pension death benefits are approaching or have exceeded the lifetime allowance
- Small businesses that want to offer death-in-service benefits without the cost and complexity of a group scheme
Tax Efficiency Compared to Personal Life Insurance
A personal life insurance policy is paid from net income after tax and National Insurance. A Relevant Life policy is paid by the company from pre-tax profits. For a higher-rate taxpayer, this can reduce the effective cost of the same level of cover by 40-50%.