Business owners and entrepreneurs are always keen to find legitimate ways to minimise their tax bill. At Four Wealth Management, we are often asked if life insurance premiums can be claimed as a business expense.
Life insurance is essential for protecting your loved ones in the event of your passing away. For business owners, a life insurance policy can be crucial to safeguard your company.
However, whether you can deduct life insurance premiums as a business expense depends on multiple factors including the type of policy, the purpose of the insurance and your business structure.
Term Life Insurance
Term life insurance provides cover for a set period of time and does not accumulate a cash value – it purely provides peace of mind and protection for a set period. Term insurance cannot be classed as business expense.
Permanent life insurance
Permanent life insurance policies such as whole of life insurance accrue a cash value over time. HMRC often allow part of the policy premium to be deducted as a business expense.
Key person insurance
If your business relies heavily on key individuals who’s death could significantly impact the business then you can purchase key person insurance to mitigate this risk. Generally, key person insurance is classed as a business expense by HMRC.
Business structure
If your business is a partnership or corporation then life insurance premiums paid by the business for the benefit of employees are likely to be able to be classed as a business expense.
As with most things, HMRC always impose certain limitations so it is important that before you take out any insurance policies, you check with a tax adviser that it is definitely tax deductible.
Find out what insurance policy is right for you
Generally, life insurance premiums cannot be claimed as a personal expense but it is likely that it could qualify as a business expense.
To compare your options with regards to what life insurance policy is right for you or your business, you can book a no-obligation meeting with a financial adviser online or by calling us on 0117 973 0500.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is dependent on individual circumstances.
