Family-run companies form the backbone of the UK economy. From boutique consultancies to multigenerational property and retail enterprises, these businesses blend commercial ambition with family values. But as the financial landscape evolves in 2025, with rising tax pressures and complex succession dynamics — many family directors are rethinking how to protect both their company and their loved ones.

One of the most effective, tax-efficient tools available to them is Relevant Life Insurance. It allows a company to fund life cover for a director or key employee, providing a tax-free payout to their chosen beneficiaries — all within HMRC’s approved framework.

At Willow Private Finance, we work with family business owners across the UK who want to secure their families’ futures without draining company resources. By using Relevant Life as part of an integrated estate and succession plan, they create a protective structure that aligns personal, corporate, and generational goals.

This guide explores how family businesses are using Relevant Life in 2025, how it fits within broader tax and inheritance strategies, and why it has become a cornerstone of responsible family governance.

Why Protection Matters More Than Ever in 2025

Family companies often face a unique set of challenges. Ownership, management, and family relationships are deeply intertwined, meaning the sudden loss of a key family member can have both emotional and financial repercussions.

In recent years, economic volatility, changing tax thresholds, and rising inheritance tax exposure have made continuity planning an essential consideration. For many families, the business itself represents the bulk of their wealth. Ensuring that value can be preserved — and passed on tax-efficiently — is critical.

Traditional life cover can achieve part of that goal but is rarely efficient for directors or shareholders of limited companies. Personal life insurance premiums are paid from post-tax income, the benefits may form part of the taxable estate, and the structure often fails to integrate with company accounts or succession plans.

Relevant Life Insurance solves these problems. It offers the same protection, but the company funds it, the payout is tax-free, and it sits outside the estate — ensuring liquidity without inheritance tax. For family firms balancing cash flow, intergenerational ownership, and long-term value, this precision matters.

How Relevant Life Works for Family Businesses

Relevant Life Insurance allows a limited company to pay for life cover on behalf of an employee or director, with the payout directed to their family or chosen beneficiaries via a discretionary trust.

The company pays the premiums, which are generally allowable as a business expense, and no benefit-in-kind charge applies to the insured person. The policy remains in force as long as the company exists, and if the director leaves, it can be transferred to a new employer or converted into a personal plan.

For family businesses, this structure has several key benefits. It separates business assets from personal risk, allows directors to provide meaningful protection for family members through the company, and does so in a way that is fully compliant and tax-efficient.

It also reinforces good governance. Many family firms struggle to distinguish between business expenses and personal spending. Relevant Life provides a clean, transparent way to offer legitimate family protection through the business without blurring financial lines.

A Bridge Between Business and Family Wealth

Family business wealth often exists in two forms: liquid income and illiquid assets. The business may own property, stock, or goodwill, but much of that value can’t easily be accessed when it’s needed most — such as in the event of a death.

Relevant Life creates an immediate source of liquidity, paid directly to the family through trust. This can help with living costs, education, or debt repayment while probate and succession plans are still being processed.

It also prevents the need to withdraw funds from the business at a vulnerable time. Rather than disrupting operations, the company can continue trading normally while the family receives the financial support they need independently.

In this way, Relevant Life serves as both protection and preservation — keeping the business stable and the family secure.

Aligning Relevant Life with Estate Planning

In 2025, estate planning has become a more pressing issue for business owners. The frozen inheritance tax threshold and rising property values mean many estates now exceed the £1 million mark, even for modestly sized family companies.

Relevant Life sits neatly within estate planning because the benefit is paid through a discretionary trust, keeping it outside the taxable estate. This means the payout avoids inheritance tax and reaches the beneficiaries quickly, without waiting for probate.

By coordinating the trust deed with wills and shareholder agreements, family directors can ensure the right people benefit in the right way. The trust structure also allows flexibility — for instance, adding children or grandchildren as future beneficiaries without rewriting the policy.

At Willow Private Finance, we often work alongside clients’ solicitors and accountants to ensure every element of their estate plan aligns. This holistic approach is what transforms simple insurance into a long-term family strategy.

The Interplay with Other Policies

Relevant Life is most powerful when combined with other forms of business protection, especially in family companies where roles overlap.

Key Person Insurance can protect the business from the financial impact of losing a critical individual, ensuring the company remains solvent while succession decisions are made. Shareholder Protection can safeguard ownership control if one family member passes away, ensuring the surviving relatives retain or fairly transfer their shareholding.

Together, these policies create a well-rounded system — one that keeps the company running, maintains ownership integrity, and supports the family’s financial wellbeing.

Relevant Life provides the personal link in that system: the policy that ensures loved ones are supported without the business itself bearing the emotional and financial strain.

Addressing Common Concerns

Some family businesses hesitate to adopt Relevant Life policies because they fear it will complicate their accounts or raise compliance questions. In reality, it’s one of the simplest and most transparent protection structures available.

HMRC fully recognises the model, and as long as the policy is written “wholly and exclusively for business purposes” — typically, providing death-in-service benefits — it qualifies for corporation tax relief.

Others assume that only larger employers or companies with group schemes can use it. In fact, it was specifically designed for smaller employers, family-run firms, and single-director companies that don’t qualify for traditional group cover.

Perhaps the most common misconception is that it’s purely about death benefits. In practice, it’s also a cornerstone of family financial planning, helping directors transfer wealth efficiently and secure future generations in line with their estate strategy.

A Case-Type Insight

Consider a small family property business owned by two siblings. Each draws income through dividends and reinvests most profits into new developments. Without liquidity, their families would face significant challenges if either director were to pass away — not only emotionally but financially, as their wealth is tied up in company assets.

By establishing individual Relevant Life policies, each director ensures their family receives an immediate, tax-free payout should the worst happen. The company can claim the premium as a business expense, and the family doesn’t face inheritance tax on the proceeds.

The result is clarity, compassion, and financial stability at a time when both the family and the company most need it.

Why It’s a Smart Move in 2025

As tax policy evolves, family business owners are increasingly seeking legitimate, compliant ways to transfer value efficiently. The combination of corporate funding, tax relief, and trust protection makes Relevant Life one of the smartest tools available.

It reflects a broader shift toward responsible planning — directors treating protection not as an expense but as an investment in family continuity and business sustainability.

In 2025, with inheritance thresholds frozen and company tax obligations rising, Relevant Life represents not just financial prudence but strategic foresight.

How Willow Private Finance Can Help

At Willow Private Finance, we specialise in helping family business owners integrate Relevant Life Insurance into their wider financial and estate planning strategy.

We manage the process end to end — from policy design and trust setup to liaising with your accountants and solicitors. Every structure we recommend is tailored, compliant, and designed to evolve as your business and family grow.

Whether you run a long-established family enterprise or are building one for the next generation, we’ll help ensure your protection strategy is as robust as your business vision.

Frequently Asked Questions

Q1: Can small family businesses use Relevant Life Insurance?
A: Yes. It’s ideal for family-run limited companies that want to offer directors or relatives life cover through the business tax-efficiently.

Q2: Does the payout form part of the estate?
A: No. It’s paid through a discretionary trust, keeping it outside the estate and exempt from inheritance tax.

Q3: Can multiple family members be covered?
A: Yes. Each family member employed by the company can have an individual policy, funded by the business.

Q4: Does it replace other business protection?
A: No. It complements policies like Key Person or Shareholder Protection, creating a complete financial safety net.



Q5: Can the policy continue if ownership changes?
A: Yes. It can usually be transferred to a new company or converted into a personal policy if circumstances change.

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