Contractors and consultants have long faced a unique financial dilemma. They earn well, often through limited companies, but lack access to the employee benefits and death-in-service schemes that larger firms enjoy. As a result, many end up paying personally for life cover that could have been funded far more efficiently through their business.

In 2025, that gap continues to close — thanks to Relevant Life Insurance.

This policy allows limited company contractors, consultants, and freelancers to provide tax-efficient life cover for themselves and their families, paid directly by their company. When structured correctly, it can deliver the same protection as a corporate death-in-service scheme — without being treated as a benefit-in-kind and while reducing corporation tax.

At Willow Private Finance, we specialise in structuring Relevant Life cover for professionals such as management consultants, IT contractors, engineers, designers, and interim executives — people who earn through their own limited companies but want the financial protection typically reserved for employees of large organisations.

If you’ve ever wondered how to get your company to pay for your life insurance legitimately, this is the guide that explains exactly how it works.

You can also read our related insights in Relevant Life vs Death in Service in 2025: Which Is Better?.

The Evolving Market for Contractors in 2025

Over the past decade, the rise of independent contracting has transformed the UK workforce. Professionals now value flexibility, autonomy, and control over income — but that independence often comes with trade-offs.

Unlike employees, contractors don’t have access to group pension schemes, corporate medical insurance, or employer-provided death-in-service benefits. Even for high earners, that lack of structured protection can leave families exposed.

At the same time, tax reforms — from IR35 enforcement to shifting dividend allowances — have increased the focus on efficient company structures. For many, the ability to use the limited company as a legitimate vehicle for protection and planning is now essential.

That’s exactly where Relevant Life Insurance fits in: it’s designed for directors and employees of small companies who want the financial advantages of a corporate benefit without the administrative burden or cost of a group scheme.

What Relevant Life Insurance Is and How It Works

A Relevant Life policy is a life insurance plan paid for by your company on your behalf. It provides a tax-free lump sum to your chosen beneficiaries if you die or are diagnosed with a terminal illness while employed by the business.

The structure is elegantly simple:

• The company pays the premiums.
• The policy is owned by the company but held in a trust for the director’s family or dependants.
• The beneficiaries receive the payout directly, free from income tax and inheritance tax.
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From a tax perspective, it’s one of the few products that meets the “wholly and exclusively for business purposes” rule — allowing the premiums to be treated as an allowable expense for corporation tax, while generating no benefit-in-kind for the insured person.

This means your company can pay for your life cover using pre-tax income, reducing its profit and tax bill, and providing your family with a fully tax-free benefit.

For contractors and consultants who already pay their own protection from post-tax funds, the potential saving is significant — often 40% or more compared to paying for a personal policy directly.

Why It’s Perfect for Contractors and Consultants

Relevant Life Insurance was designed with smaller, leaner companies in mind. You don’t need multiple employees or an HR department to qualify — only a UK-registered company and an employment relationship between the business and the insured.

This makes it ideal for:

• IT contractors and tech consultants who trade via limited companies.
• Management consultants, strategists, and analysts working on project-based retainers.
• Creative professionals such as designers, architects, or marketers.
• Engineering and construction consultants who work on long-term contracts.
• Finance and legal professionals who operate as limited company directors.

The flexibility of the policy allows each individual to set their own level of cover — not a salary multiple dictated by a group plan. That’s particularly important for high earners who pay themselves a modest salary and high dividends, since a traditional “4x salary” structure would provide insufficient cover.

A Relevant Life plan allows the sum assured to reflect true financial exposure, not just a PAYE number.

The Tax Advantages in Detail

The main reason contractors and consultants turn to Relevant Life is tax efficiency. Here’s how it works in practice:

1. Corporation Tax Relief
   Premiums are treated as an allowable business expense, reducing taxable profit and lowering the company’s corporation tax liability.
2. No Benefit-in-Kind Charge
   Unlike personal life insurance, Relevant Life doesn’t count as a benefit to the director — so there’s no income tax or National Insurance to pay.
3. No Dividend or Salary Drawdown
   You don’t need to withdraw funds from the company to pay for premiums, avoiding dividend tax.
4. Tax-Free Payout
   The proceeds are paid through a discretionary trust to your beneficiaries, completely outside your estate for inheritance tax.

The combined result is a lower tax bill, higher efficiency, and greater peace of mind. For many contractors, it’s one of the few legitimate ways to move company money into family benefit without additional tax cost.

How to Structure It Correctly

To ensure the policy retains its tax advantages, it must be set up through the company and placed in a trust at inception. The trust is the critical element — it ensures the payout bypasses both the company and the estate, guaranteeing tax-free distribution to beneficiaries.

The process typically involves:

• The director being named as the life assured.
• The company being listed as the policyholder and premium payer.
• The trust being executed with the director’s chosen beneficiaries.

At Willow Private Finance, we handle this setup end-to-end, liaising with insurers, trust providers, and accountants to confirm compliance. Once arranged, the trust typically requires no ongoing maintenance, though we recommend reviewing it every few years or after major life events (marriage, children, sale of business).

Practical Example

Let’s illustrate the numbers.

A consultant earning £150,000 per year through their limited company wants £1 million of life cover.

If they paid for a personal policy out of post-tax income, they’d need to withdraw around £1,600 gross per year from the business to cover the £1,000 premium after dividend tax.

With a Relevant Life plan, the company pays the £1,000 premium directly. It deducts the cost against profits, saving corporation tax, and there’s no personal tax liability at all. The director achieves the same £1 million of protection at roughly half the net cost.

Multiply that over ten years, and the cumulative savings could easily exceed £5,000 to £8,000, depending on the company’s tax position.

Portability and Flexibility

One of the biggest misconceptions about corporate-funded life insurance is that it’s tied permanently to the business. With Relevant Life, that’s not the case.

If you wind down your company or change employment, the policy can typically be assigned to you personally, allowing you to continue cover privately. Alternatively, it can be transferred to a new employer, ensuring continuity.

This portability makes it ideal for professionals who move between contracts, relocate internationally, or transition from contracting back to permanent employment.

At Willow, we help clients manage these transitions smoothly, ensuring the tax integrity of the policy remains intact throughout.

Integration with Wider Financial Planning

Relevant Life cover becomes even more powerful when integrated with other planning tools.

For example, pairing it with a company pension contribution allows contractors to use their limited company to fund both their future income and their family protection — all through pre-tax corporate money.

When combined with critical illness insurance or income protection, the result is a complete safety net that covers both the family and the contractor’s ongoing income needs.

Our approach at Willow is holistic: we design a strategy that looks not just at insurance, but at how each financial product supports the wider business and personal goals of the client.

The 2025 Outlook

The contractor market in 2025 remains strong but increasingly regulated. As government policy continues to scrutinise dividend extraction and IR35 compliance, tax-efficient corporate structures will only grow in importance.

Relevant Life Insurance offers an entirely legitimate way to protect your family, demonstrate corporate responsibility, and improve your business’s tax position — all without additional complexity.

For high-income contractors and consultants, it represents the best of both worlds: sophisticated personal protection and robust corporate efficiency.

How Willow Private Finance Can Help

At Willow Private Finance, we understand the realities of contractor life — variable income, complex tax structures, and the need for clear, compliant planning. We specialise in helping high-earning professionals structure their protection in a way that saves tax, safeguards family wealth, and complements broader financial goals.

Our team works across industries and alongside your accountant to ensure every policy is compliant, efficient, and structured to last. If you’re self-employed through a limited company, Relevant Life could be one of the smartest financial moves you make in 2025 — and we’ll help you get it right from day one.

Frequently Asked Questions

Q1: Can contractors use their limited company to pay for Relevant Life?
A: Yes. As long as the company is a UK-registered employer and you’re an employee or director, the policy can be funded through the business.

Q2: Is it tax-deductible for contractors?
A: Usually, yes. Premiums are typically treated as a business expense, reducing corporation tax while avoiding personal income tax.

Q3: What happens if I stop contracting?
A: You can assign the policy to yourself personally or transfer it to a new employer, keeping your cover intact.

Q4: Can Relevant Life include critical illness cover?
A: No, it covers death and terminal illness only. Critical illness must be arranged separately.



Q5: Do I need employees to qualify?
A: No. Even a one-person limited company can take out a Relevant Life policy — that’s one of its main advantages.

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