What Is a Relevant Life Policy?
A relevant life policy (RLP) is a death-in-service style life insurance plan for individual employees or directors of a limited company. The company takes out and pays for the policy, and the premiums are treated as an allowable business expense – meaning they reduce the company’s corporation tax bill.
Unlike a standard group life scheme, an RLP is set up for one individual at a time, making it ideal for small companies, single-director companies, or businesses that want to provide cover for specific key people.
How Does a Relevant Life Policy Work?
- The company takes out the policy and pays the premiums
- Premiums are an allowable business expense (reducing corporation tax)
- The premium is not a benefit in kind for the employee/director (no income tax or NI)
- The policy is written under a special trust, so the payout is not subject to inheritance tax
- If the employee/director dies, the payout goes directly to their nominated beneficiaries
RLP Tax Benefits Compared
| Tax | Personal Policy | Relevant Life Policy |
|---|---|---|
| Corporation tax relief on premiums | No | Yes |
| Income tax on premiums | Paid from taxed income | Not a BIK – no tax |
| National Insurance on premiums | N/A | None |
| IHT on payout | Only if in trust | Automatically in trust |
Who Can Get a Relevant Life Policy?
Any employee or director of a UK limited company, including:
- Single-director limited companies (including sole director/shareholder)
- Company directors who are also shareholders
- Employees of any limited company
- LLP members (in some cases)
You cannot get an RLP if you are a sole trader or in a traditional partnership. In those cases, personal life insurance is the only option.
How Much Does a Relevant Life Policy Cost?
The premiums themselves are similar to standard term life insurance – it is the tax treatment that makes them cheaper in practice. A policy costing £30/month from the company is equivalent to approximately £55–60/month from personal after-tax income for a higher-rate taxpayer.
RLP vs Death in Service (Group Life)
| Feature | Relevant Life Policy | Group Life Scheme |
|---|---|---|
| Minimum employees | 1 (including director) | Usually 3+ |
| Medical underwriting | Yes (individual) | Often free cover limits |
| Annual P11D reporting | No | No |
| Lifetime allowance impact | None | None (since April 2023) |
| Best for | Small companies, directors | Larger companies (10+) |
How to Set Up a Relevant Life Policy
Setting up an RLP is straightforward. Most major UK life insurers offer them, including Aviva, Legal & General, Royal London, Zurich, and AIG. The process involves:
- Choose a cover amount and term (similar to standard term life insurance)
- Complete a health questionnaire
- The insurer sets up the policy under a relevant life trust
- The company pays the premiums and claims them as a business expense
Frequently Asked Questions
A relevant life policy is a tax-efficient life insurance plan where a limited company pays the premiums as a business expense. The premiums are not taxed as a benefit in kind, and the payout is free from inheritance tax, income tax, and National Insurance.
Yes. A sole director of a limited company can set up a relevant life policy for themselves. The company pays the premiums, which are treated as an allowable business expense.
No. HMRC has confirmed that relevant life policy premiums are not treated as a benefit in kind. This means there is no income tax or National Insurance payable on the premiums.
For a higher-rate taxpayer, the saving is typically 40–50% compared to paying for personal life insurance from after-tax income. The exact saving depends on your tax bracket and the corporation tax rate.