Risk warning: A relevant life policy is a form of life insurance and typically has no cash-in value at any time; cover will cease at the end of the policy term. If premiums are not maintained, the policy will lapse and cover will be lost. Tax treatment depends on individual circumstances and may change in the future. This article is for information only and does not constitute financial advice.
Accountants are often the first person a limited company director asks about tax-efficient protection, simply because the conversation starts with “what can my company pay for tax-efficiently?” Relevant life policies come up often enough that it’s worth having a clear, accurate answer ready, while being clear about where your role ends and a regulated adviser’s begins.
Why Clients Ask Their Accountant First
A relevant life policy sits in a slightly unusual space: it’s a life insurance product, but the reason clients ask about it is almost always tax-driven, corporation tax relief on premiums, and no benefit-in-kind charge in the way a company-funded personal policy would create. That makes it a natural accountant conversation before it becomes an insurance one.
What You Can Confirm as an Accountant
You’re well placed to confirm the basic tax mechanics: that premiums are generally an allowable business expense attracting corporation tax relief, and that, unlike many other company-funded benefits, they typically don’t create a P11D benefit-in-kind charge for the director, provided the policy is structured correctly and written into an appropriate discretionary trust. You can also flag when a client’s structure might complicate things, such as multiple business owners, unusual shareholding splits, or existing protection policies that could overlap.
Where to Hand Off to a Regulated Adviser
Recommending a specific policy, insurer, or level of cover is regulated financial advice, which sits outside what most accountants are authorised to provide. The trust arrangement, underwriting, and choice of provider all need a qualified financial adviser, accountants who try to go further than the tax mechanics risk stepping into advice they’re not authorised to give.
How This Differs From Death in Service
Clients sometimes confuse a relevant life policy with death-in-service cover provided by a pension scheme, but they’re different products. Death in service typically requires a registered group scheme and a minimum number of employees in many cases, which rules it out for many small director-led companies, a relevant life policy has no such minimum, making it the more accessible option for a one- or two-director business. Knowing this distinction is often enough to explain to a client why relevant life comes up specifically for smaller companies rather than death in service.
Common Client Questions You’ll Hear
Directors typically ask whether they personally qualify (yes, if they’re an employee or director of a UK limited company, sole traders don’t), whether the premium is deductible (usually, subject to HMRC’s wholly-and-exclusively rule), and whether it affects their personal tax position (generally not, unlike a bonus used to fund the same cover). Being able to answer these confidently, then referring on for the regulated advice piece, is usually all a client needs from you at this stage.
Referring Clients On
If you don’t have an in-house adviser, a simple referral to a regulated financial adviser who specialises in business protection keeps the conversation moving without you taking on advice risk you’re not covered for.
Keeping Records Straight for HMRC
If HMRC ever queries the deduction, having the premium clearly recorded as a business expense, the policy correctly written into a discretionary trust, and the cover level broadly proportionate to the director’s role and remuneration all help support the wholly-and-exclusively position. This is worth flagging to clients when the policy is first set up, not after the fact.
How to Record the Premiums in the Accounts
For bookkeeping, relevant life premiums are normally posted as a business expense in the profit and loss account, commonly under staff or director welfare and insurance costs, rather than being capitalised, because the policy has no cash-in value and creates no asset. Unlike a company-funded personal policy, there is generally no corresponding entry to make on the director’s P11D, since a correctly structured relevant life policy does not create a benefit-in-kind. Keeping the expense clearly described and consistently coded from the outset makes the corporation tax deduction easier to support if it is ever queried.
What to Check Before a Client Applies
Before a director applies, it is worth confirming a few points that fall squarely within an accountant’s view of the business: that the company (not the individual) will own and pay for the policy, that the cover level is broadly proportionate to the director’s remuneration and role rather than arbitrarily high, and that any existing company-funded or personal protection is not duplicated. Flagging these early helps the regulated adviser set the policy up cleanly and supports the wholly-and-exclusively position for the premium deduction.
Does the Company Get the Payout?
No, and this is a point clients often get wrong. A relevant life policy is written into a discretionary trust, so any benefit is paid to the director’s chosen beneficiaries, not back to the company. That trust structure is central to why the premiums avoid a benefit-in-kind charge, so it is worth confirming the trust is in place at outset rather than after a claim arises.
Can You Charge for Advising on This?
An accountant can bill for the tax and bookkeeping work around a relevant life policy, confirming deductibility, recording the expense correctly, and explaining the mechanics, because that is accountancy, not regulated financial advice. What you cannot provide is a recommendation on the specific policy, provider, trust wording, or cover amount, which must come from a regulated adviser. Keeping that line clear protects both the client and your own professional cover.