Family businesses are the backbone of the UK economy — from local property firms and consultancies to manufacturing groups and professional practices passed from one generation to the next. But in 2025, these enterprises face growing challenges: rising corporation tax, tighter inheritance tax rules, and the ongoing need to protect both company value and family wealth.

That’s why Relevant Life Insurance has become a key tool for family company directors and shareholders. It bridges the gap between personal protection and corporate efficiency, allowing owners to fund life cover through their business while keeping the proceeds outside the taxable estate.

At Willow Private Finance, we specialise in helping family-run companies — from husband-and-wife directorships to multi-generational firms — structure their financial protection in a way that safeguards the business, preserves family assets, and reduces tax exposure.

This guide explains why Relevant Life Insurance is especially valuable for family-owned companies in 2025, how it fits into wider estate and succession planning, and how to ensure it’s implemented correctly.

You can also explore our related blog: Combining Relevant Life with Shareholder Protection: Smarter Business Continuity in 2025.

The Family Business Landscape in 2025

Family businesses remain a cornerstone of UK wealth creation — accounting for more than 80% of private enterprises and nearly half of employment. Yet many are exposed to financial risk when ownership and management overlap.

If a key family member — who is also a director or shareholder — dies unexpectedly, the impact can be both emotional and financial. The company may face cashflow strain, loss of leadership, or even disputes over inherited shares.

At the same time, ongoing changes to tax rules in 2025 are making inheritance planning more complex. With corporation tax up to 25% and potential inheritance tax reforms on the horizon, family company owners are increasingly focused on preserving intergenerational wealth.

Relevant Life Insurance sits at the intersection of these challenges — providing directors with personal protection funded by the company, fully compliant and highly tax-efficient.

What Relevant Life Insurance Is and Why It Matters for Family Businesses

A Relevant Life policy is a company-funded life insurance plan that pays a lump sum if the insured person — typically a director or employee — dies or is diagnosed with a terminal illness.

Unlike group life cover, which requires multiple staff, Relevant Life can be arranged even for a single director or small family team. The key benefit is structural:

• The company pays the premium, treating it as a deductible business expense.
• The policy is held in a trust for the benefit of the director’s family or chosen beneficiaries.
• The payout bypasses the estate, avoiding inheritance tax and probate delays.

For family businesses, this creates a uniquely powerful form of protection: one that ensures financial stability for dependants, supports succession continuity, and reduces the company’s overall tax burden.

Why It’s Perfect for Family-Owned Companies

Family businesses often blur the line between personal and corporate finance. Directors are typically also shareholders, employees, and family members — making it difficult to separate personal insurance from company planning.

Relevant Life solves this elegantly. It allows each director to hold individual life cover through the business, ensuring that:

• Each family member’s contribution to the company is protected.
• The business can claim tax relief on premiums.
• The payout supports dependants directly without creating tax complications.

This structure is especially valuable for:

• Husband-and-wife directorships where both partners play active roles.
• Multi-generational firms transitioning control between parents and children.
• Property, professional, and agricultural businesses where wealth is tied to assets.

By funding cover corporately and ringfencing the benefit in trust, families achieve both financial efficiency and succession stability.

Tax Advantages in 2025

The tax benefits of Relevant Life remain unmatched.

1. Corporation Tax Relief
   Premiums are typically treated as an allowable business expense, reducing taxable profits. For a company paying 25% corporation tax, a £1,000 annual premium could yield £250 in tax savings.
2. No Benefit-in-Kind Liability
   The insured family director doesn’t pay income tax or National Insurance on the premium — it’s not treated as a personal perk.
3. Inheritance Tax Exemption
   Because the policy is written into a discretionary trust, the payout is excluded from the estate, ensuring that family wealth transfers intact.
4. No Impact on Dividends
   Directors don’t need to draw additional funds to pay for personal cover, avoiding dividend tax and preserving company liquidity.

In short, Relevant Life allows family businesses to provide meaningful personal protection while strengthening corporate tax efficiency — a rare alignment in the modern financial landscape.

Integrating Relevant Life into Succession Planning

For family firms, the goal isn’t just tax savings — it’s continuity.

Succession planning involves ensuring that, if something happens to a key director or shareholder, the business can transition smoothly to the next generation or retain control within the family.

Relevant Life contributes to this plan by providing liquidity at the exact moment it’s needed most. The payout can support the deceased’s family, fund share transfers, or ease cashflow pressures during leadership change.

When paired with Shareholder Protection or Key Person Insurance, the result is a complete protection framework:

• Relevant Life – protects the individual’s family.
• Shareholder Protection – protects the ownership structure.
• Key Person Cover – protects the business revenue.

At Willow, we design these layers together, ensuring each family member’s role in the business is protected appropriately.

The Importance of Trusts in Family Scenarios

Trusts are central to making Relevant Life effective — especially in family-owned companies where beneficiaries overlap with shareholders.

By placing the policy in a discretionary trust, directors ensure the payout bypasses both the company and the estate. The trustees (often other family members or a solicitor) control distribution, ensuring fairness and compliance.

This avoids complications such as payouts being treated as company assets or share transfers triggering disputes.

At Willow Private Finance, we work closely with clients’ solicitors and accountants to ensure trust documents are correctly executed, beneficiary lists are up to date, and trustees understand their duties.

A Practical Example

Imagine a family business with two directors — a husband and wife. Each owns 50% of the company, and their adult children are beginning to take on senior roles.

If one director passes away without adequate cover, the surviving spouse may face immediate financial strain, inheritance tax complications, and potential business disruption.

With Relevant Life policies in place for both directors, the company pays the premiums, claiming tax relief each year. On death, the payout goes to a trust for the family, outside the business and estate, providing tax-free liquidity.

The family maintains financial security, and the business can continue without the need to liquidate assets or borrow to cover short-term costs. It’s a simple yet transformative safeguard.

Common Pitfalls to Avoid

Family businesses sometimes make errors when implementing Relevant Life cover — often unintentionally:

• Forgetting to execute or update the trust document.
• Naming the company rather than beneficiaries in the trust.
• Allowing cover levels to stagnate as the company’s value grows.
• Failing to integrate Relevant Life with wider estate and shareholder planning.

Each of these can reduce efficiency or compromise the tax benefits. Willow’s advisory process ensures every detail — from policy ownership to trustee appointment — is compliant, aligned, and futureproof.

Outlook for 2025 and Beyond

In an era where tax efficiency and succession security are paramount, Relevant Life Insurance is no longer a niche benefit — it’s a strategic tool for family enterprises.

As business ownership continues to transition to younger generations, families are prioritising long-term continuity, inheritance planning, and wealth protection. Relevant Life fits squarely within this mission, offering directors a way to secure both personal and corporate outcomes with one simple structure.

Looking ahead, the trend is clear: more family firms are treating Relevant Life as an essential part of responsible stewardship — protecting not just the business, but the legacy behind it.

How Willow Private Finance Can Help

At Willow Private Finance, we help family company owners structure Relevant Life and related protection policies in a way that complements their tax strategy, estate plan, and long-term goals.

We work closely with accountants, legal advisers, and trustees to ensure each policy is correctly established, fully compliant, and integrated into the family’s overall financial framework.

Whether you’re running a small husband-and-wife business or a multi-generational enterprise, we’ll help you build protection that lasts beyond the next fiscal year — ensuring peace of mind for decades to come.

Frequently Asked Questions

Q1: Can family members be covered under the same Relevant Life plan?
A: No. Each director or employee must have their own policy, but the company can fund multiple individual plans.

Q2: Can Relevant Life help with inheritance tax planning?
A: Yes. The payout is held in trust, keeping it outside the estate and avoiding inheritance tax for the family.

Q3: What happens if the business is sold or restructured?
A: Policies can often be reassigned to a new employer or retained privately — Willow can assist with this process.

Q4: Can multiple family directors each claim tax relief on their policies?
A: Yes. Each policy is individually funded by the business and typically deductible for corporation tax purposes.



Q5: Does Relevant Life replace other protection like Key Person or Shareholder Cover?
A: No. It complements them — Relevant Life protects the family, while other policies protect business continuity.

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