If you run a limited company, a relevant life plan can fund your cover more efficiently

The conversation goes like this often enough that I can predict it. A director tells me they have life cover sorted. Personal policy, direct debit out of the joint account, been running for years. All fine. Then I ask how they pay for it, and the answer is always the same: out of their own pocket, from income the taxman has already been through.

Which works. It is just rarely the most efficient way for a company director to do it, and most of them have never had the alternative put in front of them.

What a relevant life plan is

It is a life policy the business takes out and pays for on the life of an individual employee or director, with the benefit going to that person’s family or beneficiaries when they die.

In effect it gives one person death in service style cover, arranged through the company. Small companies do not tend to have the group schemes that large employers run. This brings something comparable within reach of the people who own the small company.

Where the efficiency comes from

Two ends of the same arrangement.

At the paying end, the premiums are generally met by the company and can usually be treated as a business expense, rather than coming out of income you have already been taxed on. The arrangement is normally structured so the benefit does not count as a taxable benefit in kind for the individual in the way some other arrangements might.

At the receiving end, relevant life plans are typically written in trust as part of the set up. So the proceeds can usually pass to the beneficiaries outside the estate, potentially free of inheritance tax, and without waiting on probate.

Efficient going in. Efficient coming out.

Who it suits

Directors of small limited companies, and their employees. People who already run things through a business and would rather not fund personal cover from taxed income.

They are not right for everybody, and the eligibility is not a formality. If you are not a company director or an employee, you cannot use one at all. The tax and legal conditions attached are specific and they need checking against your actual circumstances, which is a job for proper advice rather than an article.

But if you own a limited company and nobody has ever mentioned this to you, that is worth knowing.

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Tax treatment depends on individual circumstances and may change over time. The value of any tax benefits or reliefs will therefore vary from person to person and cannot be guaranteed.

Trusts are not regulated by the Financial Conduct Authority.

Please note that relevant life plans do not have a cash-in value and will stop if payments to them cease.

This article is general information rather than personal or business financial or tax advice. Relevant life plans carry specific eligibility, tax and legal conditions, so please take professional advice on whether one suits you.

Legacy Capital Management is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website at www.sjp.co.uk/products.

The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.

Legacy Capital Management, Rosewood House, Duffield Park, Stoke Poges, SL2 4HY

SJP Approved 28/07/2026