Great – you’ve got some life cover, but is it Relevant?

Financial Planner
Shaun Brennan DipPFS BSc(Hons)
Shaun has been looking after clients since 1988 and in that time has helped many families and business owners plan for their future and achieve their goals. Shaun was also the pioneer of our inaugural ‘Joined-Up-Expertise’ event for business owners.

Most people I speak to are aware that life cover comes in many forms.  This is typically level term assurance (a set amount of cover, over a set period of time), mortgage protection (a decreasing amount of cover, over a set period of time) and whole of life cover (does what it says on the tin!).  But I’m constantly surprised by the number of people I speak to in businesses that have never heard of Relevant Life Cover. 

Relevant Life Cover is a type of death in service benefit. It provides an extremely tax efficient way for a company to provide life cover for its employees, and typically it’s directors.  Anyone who is resident in the UK and an employee of a UK resident business (usually including company directors on PAYE and salaried partners) can be covered by a Relevant Life policy. 

Why is it so good? There are many benefits to this type of cover, including; 

·        The business pays for the policy and the premiums are classed as an allowable expense to the business. This reduces the cost to the business of providing a valuable benefit to employees as well as also coming off their top line when it comes to Corporation Tax. 

·        For employees, the premiums paid by the employer are not considered a taxable benefit in kind, so the employee does not pay income tax on the premiums.  

·        Both the business and the employee avoid paying National Insurance contributions on the premiums.

·        Relevant Life Cover policies are individual, so different people in the business can have different amounts of life cover.

So how much cover could I have?  Usually cover up to 25 times your salary won’t be a problem, and financial underwriting generally isn’t needed for sums assured below £3 million.

What about Inheritance Tax? Like most life assurance policies, Relevant Life Cover should be written under trust.  This means, if established correctly, that the benefits paid from a Relevant Life Cover policy should not form part of the estate of the employee for Inheritance Tax purposes and will therefore be tax free and immediately in the hands of your loved ones.

If you are a business owner currently paying for your own life cover and want to check whether it is – or perhaps should be – Relevant then please do reach out.  There’s nothing to lose and potentially quite a bit to gain as opposed to going down the more ‘traditional’ route of a personal policy.

Approver Quilter Financial Services Limited & Quilter Mortgage Planning Limited. 10/10/2023

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