LTD Company BTL Case Study: Tax-Efficient Life Assurance for Company Directors

The challenge: life assurance needs, but a group scheme wasn’t practical

For many limited company owners, providing death-in-service style cover for directors and key people is a priority. The complication is often the structure of the business and the number of individuals who need cover.

In this case, E-Z-Aire Ltd (EZA)—a private limited company—wanted to provide death-in-service benefits for three individuals. However, the company had not been able to secure a group life arrangement because the available group scheme options required at least five members.

That left the directors with a common question: how can the company provide meaningful cover without forcing everyone into a group structure that doesn’t fit?

The business and the people involved

EZA designs and manufactures industrial air conditioning equipment. It had two 50% directors and one key non-shareholder whose role was critical to sales performance.

• Ben Richards (Managing Director, 49)

  • Higher-rate taxpayer
  • Already held level term life assurance personally, with a sum assured of £800,000
  • Cover was intended to support his wife and teenage daughter

• Bruce Davies (Head of Sales, 41)

  • Higher-rate taxpayer
  • Not a shareholder
  • Had a £675,000 level term policy written in trust to support his partner, Sarah, and help repay the mortgage

• Alan Bell (Director, 42)

  • Higher-rate taxpayer
  • Had limited savings and a young family
  • Had personally funded term cover of £800,000, providing a combination of mortgage and family protection

In each instance, the life assurance premiums were being paid from the individuals’ post-tax income.

The alternative solution: relevant life policies arranged by the company

Rather than trying to fit the business into a group life scheme, the company explored an approach that can work well for smaller groups: relevant life policies.

The solution was to apply for separate death benefit plans on the life of each individual, with the policies set up from the outset under a relevant life policy trust.

This structure is designed so that:

• the company pays the premiums
• the benefits are held for the dependants (or other beneficiaries) through the trust arrangement
• the company can potentially provide death-in-service style cover without needing a group scheme

Why this can be beneficial for limited company owners

While every situation is different, the key themes in this case study were:

1) Premiums can be treated differently when paid by the company

Because the premiums are paid by the employer, the overall cost picture can change compared with individuals paying personally from taxed income.

In the case of EZA, the case study describes the premiums being treated as a trading expense (subject to the usual HMRC approach and the facts of the arrangement).

2) The benefit can be positioned to support dependants

The policies were written under a relevant life policy trust so that, on death, the benefits would be paid for the benefit of the dependants—typically aiming to provide a straightforward route for the family to receive the protection.

3) The company can provide cover without increasing personal tax exposure

For the individuals, moving from personally funded premiums to company-paid relevant life policies can reduce the need to fund cover from post-tax income.

Cost comparison: how the numbers worked in practice

To illustrate the potential difference, the case study compared the cost of self-paid cover versus the cost of relevant life policies arranged by the company.

Important: The figures below are taken from the case study scenario and are included to show how the comparison was framed. They are not a quote, and actual outcomes depend on personal circumstances, policy pricing, and tax treatment at the time.

Summary of the example

How the comparison was framed

The case study explained the self-paid comparison as the employer-equivalent cost of providing the same level of cover if the individual had to pay from post-tax income, taking into account income tax and National Insurance assumptions.

For the relevant life policies, the net cost to the employer was assessed as the premium less relief, reflecting the company’s corporation tax position.

Important notes on tax and circumstances

Tax treatment can vary depending on the facts of the arrangement and changes in legislation or HMRC practice. The case study figures reflect the scenario described and the understanding of tax practice at the time.

A relevant life policy arrangement is not a one-size-fits-all solution—its suitability depends on factors such as:

• who the policy is for (directors, employees, key individuals)
• the trust structure and how benefits are intended to be paid
• the company’s wider circumstances and how the premiums are accounted for
• the insurance underwriting and policy terms

What this case study shows for limited company owners

This example highlights a practical outcome for smaller limited companies:

• when group life schemes aren’t available or don’t fit the number of people
• relevant life policies can provide a structured way for the company to fund life assurance
• the overall cost of cover may be lower than personally funding equivalent protection, depending on tax treatment and the specific facts

In short, the case demonstrates how a company can align life assurance planning with its staffing structure—while focusing on a more tax-efficient way to manage the cost of cover.