For many directors, life cover and business continuity planning are treated as two separate priorities — one personal, one corporate. Yet in 2025, the smartest business owners are learning that integrating these strategies not only strengthens protection but also unlocks powerful tax and succession advantages.

Two key policies lie at the heart of this approach: Relevant Life Insurance and Shareholder Protection.

Relevant Life ensures a director’s loved ones are cared for if the worst happens, while Shareholder Protection ensures the business itself remains stable, preventing ownership disputes and preserving value.

At Willow Private Finance, we work with directors and business partners across the UK to align these two complementary policies into a single, cohesive structure — one that protects both family wealth and corporate control.

If you already hold a Relevant Life policy or are considering Shareholder Protection for 2025, understanding how they interact can make the difference between a simple payout and a complete succession plan.

You can also explore our related insights in Relevant Life Insurance for Small Business Directors: 2025 Planning Essentials and The Tax Benefits of Relevant Life Insurance for Business Owners.

The Market Context in 2025

The economic climate in 2025 continues to test UK businesses. Higher financing costs, moderate inflation, and a renewed focus on succession planning have forced directors to think long-term.

Private companies, particularly those with multiple shareholders or partners, face the growing challenge of what happens to ownership if one director dies or becomes critically ill. Without a clear plan, shares can pass unexpectedly to family members, creating both financial and operational instability.

At the same time, small limited companies are becoming more tax-savvy, increasingly using Relevant Life policies to provide directors with personal cover through the business in a way that’s both compliant and cost-effective.

The natural next step is to connect these two worlds — to ensure that when personal protection is triggered, the business remains secure, and ownership transitions smoothly. That’s where the integration of Relevant Life and Shareholder Protection becomes vital.

Understanding Relevant Life Insurance

A Relevant Life policy is an individual death-in-service plan funded by the company for the benefit of the director or employee.

It pays a lump sum to the director’s chosen beneficiaries, usually family members, if they die or are diagnosed with a terminal illness while employed.

Crucially, the policy is written into a trust, keeping the proceeds outside the individual’s estate for inheritance tax purposes. Premiums are paid by the company, usually treated as a corporation tax-deductible expense, and there’s no benefit-in-kind liability for the insured.

For small limited company owners, this means personal protection can be arranged with pre-tax business funds, providing a high level of cover while remaining HMRC-compliant.

Relevant Life is about protecting the individual and their family — not the company itself. Yet, as we’ll see, when combined with Shareholder Protection, it becomes part of a much larger strategy.

Understanding Shareholder Protection

Shareholder Protection Insurance (sometimes called Ownership Protection) ensures that if a shareholder or partner dies, the surviving owners can buy back the deceased’s shares quickly and fairly.

Without such an agreement, ownership can become fragmented. The deceased’s shares might pass to their spouse or heirs, who may not wish to be involved in the business — or worse, may wish to sell to external parties.

Shareholder Protection solves this by pairing a legal agreement with an insurance policy. The agreement (often a cross-option or buy-sell clause) defines how shares will be valued and transferred. The policy provides the funds for that transaction.

In the event of a shareholder’s death, the policy pays a lump sum to the surviving owners, allowing them to purchase the deceased’s equity from the family, ensuring the business remains under experienced management.

Why Combining the Two Matters

Relevant Life and Shareholder Protection serve different purposes but often apply to the same individuals — directors who are both shareholders and employees of their company.

In many businesses, the death of a key director triggers two financial consequences: a personal loss for their family and a structural challenge for the company.

If the director only has Relevant Life cover, their family receives financial support — but their shares may remain tied up in probate, delaying succession.

If only Shareholder Protection exists, the business can repurchase shares — but the family may be left with no additional financial support beyond the sale proceeds.

By combining the two, directors create a dual-layered safety net:

• Relevant Life protects the family personally.
• Shareholder Protection protects the business and surviving owners.

The result is seamless continuity — liquidity for the family, stability for the company, and clarity for everyone involved.

Tax Efficiency and HMRC Treatment

From a tax perspective, both policies are powerful — when structured correctly.

Relevant Life enjoys clear HMRC endorsement as a legitimate business expense, provided it benefits the employee and not the company. Premiums are usually deductible for corporation tax, with no P11D charge for the director. The payout, made via trust, is free from income tax, inheritance tax, and National Insurance.

Shareholder Protection is treated differently. The company cannot normally deduct the premiums, as the policy benefits the shareholders, not the business. However, the payout is tax-free if the policy is structured for capital purposes — that is, to fund the purchase of shares rather than to replace trading income.

When integrated, this combination ensures both sides — personal and business — are covered efficiently. Directors receive family protection through a deductible policy, and ownership succession is funded through a clean capital arrangement.

Structuring Both Policies Correctly

While it may seem straightforward to take out both types of cover, the structuring is where most mistakes occur.

A Relevant Life policy must be written into a discretionary trust for the director’s beneficiaries, not the company. Conversely, Shareholder Protection should either be company-owned or individually owned depending on how the business agreement is set up.

There are two main structures:

1. Company Share Purchase Arrangement — the company takes out the policy on each shareholder and uses the payout to buy back the shares.
2. Cross-Option (Individual) Arrangement — each shareholder takes out a policy on their own life, written in trust for the other shareholders.

Which is best depends on the company’s shareholding structure, Articles of Association, and how the directors wish to manage control in the future.

At Willow Private Finance, we work closely with accountants, solicitors, and financial planners to ensure these elements are aligned from the outset. The goal is to create a structure that’s compliant, watertight, and efficient across both tax and ownership planning.

A Realistic Scenario

Consider two directors, both equal shareholders in a limited company. Each has a family who relies on them financially.

If one director passes away without a Relevant Life or Shareholder Protection plan, their family may inherit the shares but lack the expertise or desire to be involved in the business. The surviving director may wish to buy them out but could lack the funds.

This is where the combined strategy proves its value. The Relevant Life policy ensures the family receives an immediate tax-free benefit to secure their personal finances, while the Shareholder Protection policy gives the surviving director the capital needed to purchase the deceased’s shares swiftly.

The family receives fair value, the surviving director retains control, and the company continues uninterrupted. That is the essence of continuity planning.

Common Mistakes to Avoid

The most frequent issues arise not from intent but from poor coordination:

• Directors arranging a Relevant Life policy personally instead of via the company.
• Failing to execute or update cross-option agreements when ownership changes.
• Using a single insurer for both policies without separating trusts correctly.
• Neglecting to review cover levels as the company grows or valuations change.

Willow Private Finance ensures every part of the process — from insurer selection and trust documentation to valuation review and premium allocation — is handled in line with both HMRC guidance and FCA compliance.

We believe the protection plan of a company should evolve with it — and that’s exactly how we build them.

Outlook for 2025 and Beyond

As the tax environment tightens and corporate succession becomes more complex, directors will increasingly turn to dual protection planning as a standard practice.

Relevant Life will remain the most effective tool for directors seeking personal cover through their company, while Shareholder Protection will continue to be the backbone of ownership stability.

When combined, they offer something even more valuable — a blueprint for continuity. One protects your family. The other protects your business. Together, they protect everything you’ve built.

How Willow Private Finance Can Help

At Willow Private Finance, we help directors, entrepreneurs, and business partners implement these layered protection strategies — not as isolated policies, but as part of an integrated financial framework.

Our advisers understand both the technical and emotional sides of ownership planning. We liaise with accountants, solicitors, and insurers to ensure every policy is structured properly, every trust is compliant, and every director knows exactly how their arrangements would work in real life.

If you want to protect your family and secure your business for the future, we’ll help you design a structure that does both — elegantly, efficiently, and intelligently.

Frequently Asked Questions

Q1: Can I hold both Relevant Life and Shareholder Protection policies?
A: Yes. Many directors combine both for full coverage — one protects family wealth, the other ensures smooth ownership transfer.

Q2: Are the premiums tax-deductible?
A: Relevant Life premiums usually are; Shareholder Protection premiums typically are not. However, both have favourable tax treatment on payout when structured correctly.

Q3: Do both policies need a trust?
A: Relevant Life must always be in trust; Shareholder Protection depends on the ownership structure — some use trusts, others are company-held.

Q4: What happens if share values increase?
A: Policies should be reviewed regularly to match updated valuations; otherwise, payouts may not fully cover buyout costs.



Q5: Can family members keep the shares if they wish?
A: Yes, but most agreements include cross-options allowing surviving directors to buy them. Shareholder Protection simply ensures the funds are available for that transaction.

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