Relevant Life Insurance for Contractors
Operating through a limited company? Your company can pay for your life insurance — with potential tax advantages a personal policy cannot match.
For contractors running their own limited company, a Relevant Life Plan is one of the most cost-effective ways to arrange life insurance. Rather than paying premiums from personal income that has already been taxed, your company pays the premiums directly. The tax treatment may be significantly more favourable than a personal policy, subject to HMRC rules and your company's circumstances.
What is Relevant Life Insurance for Contractors?
A Relevant Life Plan is a single-life, term assurance policy taken out by your limited company on your life. The policy is written in a discretionary trust, so the payout goes directly to your family or dependants and falls outside your estate for inheritance tax purposes. It provides the same cover as a personal life insurance policy — a lump sum paid on death within the policy term — but the structure and payment method are fundamentally different, and potentially much more tax-efficient for contractors.
Who is it suitable for?
Key Benefits
Tax Considerations
For contractors, the potential tax advantages of a Relevant Life Plan over a personal policy can be substantial. Premiums paid by your company may qualify for corporation tax relief, subject to HMRC rules and your company's circumstances. You pay no income tax or National Insurance on the premiums. Compare this to a personal policy, where you pay premiums from income that has already been subject to income tax, National Insurance, and potentially dividend tax. The overall saving depends on your tax position and individual circumstances. We recommend seeking independent tax advice.
Tax treatment depends on individual circumstances and may be subject to change. We recommend seeking independent tax advice.
Example Scenarios
IT contractor
An IT contractor operating through their own PSC currently pays £80/month for personal life insurance from post-tax income. By switching to a Relevant Life Plan, their company pays the premiums instead — with potential corporation tax relief and no income tax or NI on the benefit, subject to HMRC rules.
Consultant with salary and dividends
A consultant taking a low salary and higher dividends can include both in their total remuneration for cover calculation purposes — typically up to 25× total remuneration — giving them meaningful cover at a potentially lower effective cost.
Contractor approaching retirement
A contractor in their 50s wants to ensure their family is protected until they wind down their company. A Relevant Life Plan provides term cover to their planned retirement date, paid by the company.
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