Company Director Life Insurance

Life insurance cover for directors of limited companies

As a company director you may be eligible to take out life insurance in a more tax-efficient and therefore cost-effective manner than your existing life insurance arrangements.

As a company director, if you have existing life insurance you will likely be paying for it in one of two ways - either directly out of your post-tax income, or alternatively out of the company account. Either way, you will be subject to taxation, whether that is on the earned income from which you pay the premiums, or due to a P11D benefit in kind liability arising.

"It is now possible, provided you fulfil certain criteria, to take out a company director life insurance plan that is paid for by your company, does not incur any P11D liability and would likely be classed as an allowable expense against the companies Corporation Tax liability."

As can be seen from the example below of a basic rate tax-payer, the net cost to the individual company director using this arrangement is significantly lower than when paying for a standard personal life insurance policy via the company account.

This difference is greater still when a company director life insurance premium has been for out of post-taxed income and even more so for higher-rate tax payers.

*all of the above calculations are based upon tax rates for the year 2011/12.

Due to the legislation surrounding these plans it is important to ensure the eligibility criteria are met as this could have a significant impact on whether or not tax relief is granted. Also, as these plans are arranged as part of a commercial arrangement it is important to ensure appropriate specialist advice is taken.