One Man Ltd company contractors can now fund life insurance through the business with no income tax or benefit in kind considerations.

Contractor Financials was chosen by a number of product providers to introduce a tax efficient life cover contract for SMEs and freelancers that for the first time allows you to avoid tax charges on this essential protection for your family.

Thanks to a specially worded trust document, smaller companies now have the chance to tax efficiently provide death in service benefits for their employees, with any eventual pay out also free of inheritance tax.

Contractors using a One Man Ltd company can therefore offload the cost of life insurance to your business rather than fund the cost personally from your post-tax income, with the premiums treated as a business expense.


Case study

Engineering contractor Peter Douglas draws an extra £50pm gross by way of dividends and salary to meet his £30pm ‘net’ life cover cost which provides £300k to pay off his mortgage and protect wife Karen and kids Max and Sophie. Using this new plan the company can pay the £30pm for him saving approx £240 in unnecessary tax deductions per annum.


Unlike more traditional ‘Keyman’ insurance, where any pay out on death invariably belonged to the company and so the business or your dependents could ultimately be taxed upon receipt of the funds, with this ‘Relevant life’ cover, benefits are payable through a simple discretionary trust.

The new product essentially works the same as the old pension term assurance but does not affect your lifetime or annual pension allowances. So those freelancers with a large pension pot are still able to benefit from the lucrative tax relief on pensions contributions whilst your life cover contributions now offer you a further opportunity to save further tax.

Your cover is kept in trust and this not only keeps the money safe from any liabilities that the company has but also makes the plan easier to transfer. This means that even if you decide to hang up your contracting hat and return to permanent employment, you can still benefit from the tax savings by simply transferring your policy to your new employer or alternatively can go back to paying premiums personally again from post-tax earnings.

To find out more call 0333 370 8888 or fill in the contact form and we will be in touch.