Is Relevant Life Insurance a Benefit-in-Kind? The Answer Explained

In short, no – relevant life insurance is not a benefit-in-kind. HMRC specifically excludes it from benefit-in-kind tax under EIM15045, which means the director does not pay income tax or National Insurance on the premiums the company pays on their behalf.

It is one of very few company-paid personal benefits that carries no BIK charge. Here, we explain why the exemption exists, how it compares to other business life insurance products, and what the zero BIK status means in practice for a limited company director.

Key Facts

• Relevant life insurance is specifically excluded from benefit-in-kind (BIK) tax under HMRC EIM15045.
• The director pays no income tax or NI on the premiums, regardless of how large the policy is.
• Health insurance and company cars typically attract BIK, where relevant life insurance does not.
• Shareholder protection insurance can attract a BIK charge at the director’s marginal rate subject to the type of policy taken out.
• Key person insurance and executive income protection also carry no BIK, as the business is the direct beneficiary.
• A zero BIK charge is one of the primary reasons limited company directors favour relevant life insurance over other life insurance options.

What Is Benefit-in-Kind Tax?

Benefit-in-kind (BIK) is a tax charged to employees or directors who receive a personal benefit paid for by their employer. HMRC’s position is that if your employer pays for something you could use personally, such as a car, private medical insurance, or living accommodation, then you are receiving a ‘benefit’ and should pay tax on it. The rules are set out in HMRC’s Employment Income Manual.

The BIK charge is calculated as a percentage of the benefit’s value, and the rate is typically linked to the recipient’s marginal income tax rate. A higher-rate taxpayer, for example, pays BIK at 40%, so a company-paid benefit worth £1,000 would generate a £400 income tax charge.

Why Is Relevant Life Insurance Exempt from Benefit-in-Kind Tax?

Relevant life insurance is exempt from benefit-in-kind tax because HMRC has specifically legislated for it. The exemption is set out in EIM15045 — Employer-financed retirement benefit schemes: relevant life policies. 

For the exemption to apply, the policy must meet HMRC’s qualifying conditions:

• The life assured must be an employee or director
• The policy must be a pure term life assurance policy, not investment-linked
• The benefit must be payable to the employee’s family, dependants, or personal representatives
• The policy must be held under a relevant life trust from the outset

When these conditions are met, HMRC treats the premiums as a legitimate business expense rather than a personal benefit to the director. The director receives the benefit of peace of mind that their family is protected, without being taxed on it.

This is also why relevant life insurance does not appear on a P11D form. Because benefit-in-kind tax does not apply under EIM15045, there is nothing to declare. A P11D life insurance director situation only arises with policies that fall outside the EIM15045 exemption, such as shareholder protection.

How Does Relevant Life Insurance Benefit-in-Kind Compare to Other Business Insurance?

Not all business protection insurance is exempt from benefit-in-kind. The tax treatment depends on who receives the benefit, whether it is the individual or the business, and how the policy is structured.

Here is how the main products compare:

Why does shareholder protection attract BIK but relevant life insurance does not?

The key distinction is the direct personal benefit to the life assured. With a standard, trust-based shareholder protection arrangement, the company pays a premium on a policy that benefits the director personally, which is why it can attract a BIK charge at their marginal rate. Some structures, such as a company share buyback, avoid this because the company is the policyholder and beneficiary throughout, with no personal benefit passing to any director.

With relevant life insurance, although the benefit ultimately goes to the director’s family, it does so through a trust mechanism that HMRC has specifically legislated to exclude from BIK. The distinction is technical, but it has a significant practical impact on the director’s tax position. This applies equally to relevant life policy director arrangements and to policies covering other employees of a limited company.

What Does Zero Benefit-in-Kind Mean in Practice for a Limited Company Director?

For a higher-rate director, avoiding a benefit-in-kind charge is worth real money. Consider a policy with a premium of £200 per month. With private health insurance, that premium at the higher rate would generate a BIK charge of £80 per month – £960 per year on top of the premium itself. With a relevant life policy, that charge is simply zero.

Combined with the corporation tax relief on the premium (under HMRC EIM15045, premiums on a relevant life policy are an allowable business expense, attracting corporation tax relief at 19–25% for 2026/27), this makes relevant life insurance one of the most tax-efficient personal benefits available to a company paid life insurance arrangement. The company saves tax on the cost; the director pays no tax on the benefit.

Could your company pay for your life insurance more tax-efficiently?

Relevant life insurance is not treated as a benefit-in-kind, making it a particularly tax-efficient way for a limited company to provide life cover for a director. When structured correctly, the company can pay the premiums without the director facing an income tax or National Insurance charge, and there is no P11D reporting requirement. This sets relevant life insurance apart from benefits such as private medical insurance and certain other company-funded arrangements that can create a personal tax liability.

Relevant life insurance could allow you to protect your family while paying for cover through your limited company. Speak to our team to find out whether a relevant life policy is suitable for you and how much you could save compared with paying for personal life insurance from your post-tax income.

Written by

Alex Ogden DipFA | Director | Executive Life

Alex Ogden DipFA holds the Level 4 Diploma for Financial Advisers (DipFA) awarded by the Walbrook Institute London, formerly known as the London Institute of Banking & Finance (LIBF), the FCA's benchmark qualification for retail investment advisers. He is authorised by the FCA, Ref: AJO01072. View the FCA register entry.

Tax rates and thresholds are subject to change.