Is Key Man Insurance Tax-deductible?

Is Key Man Insurance Tax-deductible?

Cover Key Employees

This is usually considered to be a benefit to the business. The premiums are tax-deductible. 

The benefits are taxed as a trading receipt, so the amount of life cover will need to factor in the taxation. 

Cover Key Employees

This is usually considered to be a benefit to the business. The premiums are tax-deductible. 

The benefits are taxed as a trading receipt, so the amount of life cover will need to factor in the taxation. 

Protects Shareholders

This does not benefit the business. 

The premiums are not tax-deductible. 

The benefits are taxed as a trading receipt 

Protects Shareholders

This does not benefit the business. 

The premiums are not tax-deductible. 

The benefits are taxed as a trading receipt 

Protects Business Loans

This is a benefit to the lender, rather than to the business. The premiums are not tax-deductible. 

The payout is not normally classed as a trading receipt, rebalancing the company's capital account, which is not liable to tax.

Protects Business Loans

This is a benefit to the lender, rather than to the business. The premiums are not tax-deductible. 

The payout is not normally classed as a trading receipt, rebalancing the company's capital account, which is not liable to tax.

Please contact us with your Key Person Insurance query

Please contact us with your Key Person Insurance query

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Simply enter your details below for us to help you.

By submitting  information through this website, you have given your agreement to receive verbal contact from us to discuss your insurance requirements. You voluntarily choose to provide personal details to us via this website. 

Personal information will be treated as confidential by us and held in accordance with the Data Protection Act 2018.  You agree that such personal information may be used to provide you with details of services and products in writing, by email or by telephone.

By submitting this data, I am consenting to the use of my data in line with our  Privacy Policy

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What is 3 + 5 =

What is 3 + 5 =

In most cases, yes, if the key person does not have a significant holding in the business. HMRC will consider the purpose of the plan and who is to receive the benefits. Find out more about the taxation below.

In most cases, yes, if the key person does not have a significant holding in the business. HMRC will consider the purpose of the plan and who is to receive the benefits. Find out more about the taxation below.

The typical level of Key Person Insurance cover is calculated in one of two possible ways, as follows: 

1) Based on a multiple of company profits, typically two times gross profit or five times net profit.  

2) Based on the key person's contribution to the company's profitability

The Key person's remuneration is divided by the total salary of the business, then multiplied by the average gross profit over two years. Then multiplied by the number of years the business expects it will take to recover.

The typical level of Key Person Insurance cover is calculated in one of two possible ways, as follows: 

1) Based on a multiple of company profits, typically two times gross profit or five times net profit.  

2) Based on the key person's contribution to the company's profitability

The Key person's remuneration is divided by the total salary of the business, then multiplied by the average gross profit over two years. Then multiplied by the number of years the business expects it will take to recover.

HMRC will consider the purpose of the insurance, and who is to receive the benefits, to determine the tax treatment. 

Most commonly, Key Person Insurance is taken out by a company to:

  • Cover key employees
  • Protect business loans
  • Protect shareholders

HMRC will consider the purpose of the insurance, and who is to receive the benefits, to determine the tax treatment. 

Most commonly, Key Person Insurance is taken out by a company to:

  • Cover key employees
  • Protect business loans
  • Protect shareholders

The Taxation of Key Person Insurance

The Taxation of Key Person Insurance

Tax implications are dependent upon how the policy is used 

Tax implications are dependent upon how the policy is used 

How much Key Person Insurance cover should we take out?

How much Key Person Insurance cover should we take out?

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