Does relevant life insurance appear on a P11D?
In most cases, no.
One of the main tax advantages of relevant life insurance is that the premiums are not normally treated as a taxable benefit in kind. As a result, they generally do not need to be reported on a P11D.
This is one of the reasons relevant life insurance is popular with limited company directors looking for a tax-efficient way to provide life cover.
If you’re new to relevant life insurance, start with our guide to what relevant life insurance is.
Relevant life insurance premiums do not normally need to be reported on a P11D because qualifying policies are generally exempt from benefit in kind treatment. This means the employee usually pays no Income Tax on the premiums, and the employer normally avoids Class 1A National Insurance contributions.
What is a P11D?
A P11D is a form employers use to report certain benefits and expenses provided to employees and directors.
Typical examples include:
- private medical insurance
- company cars
- beneficial loans
- living accommodation
- other taxable employee benefits
Where a benefit is taxable, it will often need to be reported to HMRC unless it has been payrolled or falls within a specific exemption.
Why relevant life insurance is different
Although the company pays the premiums, a qualifying relevant life policy is normally exempt from benefit in kind treatment.
That means the premiums are not usually treated as additional taxable income for the employee or director.
As a result, there is generally no requirement to report the premiums on a P11D.
This favourable treatment is one of the main reasons directors often choose relevant life insurance instead of paying for a personal life insurance policy from taxed income.
Does the employee pay tax on the premiums?
Normally, no.
Provided the policy satisfies the relevant qualifying conditions, the employee does not usually pay Income Tax on the value of the premiums.
Equally, the employer would not normally pay Class 1A National Insurance contributions because the premiums are generally not treated as a taxable benefit in kind.
Does the company still receive tax relief?
In many cases, yes.
Relevant life insurance premiums are often treated as an allowable business expense where the usual tax conditions are satisfied.
This means the company may be able to deduct the cost when calculating its taxable profits for Corporation Tax purposes.
We explain this in more detail in:
Are there any exceptions?
The tax treatment depends on the policy qualifying as a relevant life policy.
If a policy does not satisfy HMRC’s conditions, the favourable tax treatment may not apply.
For example, the policy must meet the legislative requirements for a relevant life policy and generally needs to provide pure life cover rather than investment or surrender benefits.
Our guide to HMRC’s rules on relevant life insurance explains these conditions in more detail.
What does HMRC say?
HMRC’s Employment Income Manual explains that qualifying relevant life policies sit outside the normal employer-financed retirement benefits charge.
It also explains that, depending on the circumstances, the premiums may qualify for exemption from benefit in kind treatment.
In practice, this is why qualifying relevant life insurance premiums are not normally reported on a P11D.
HMRC’s guidance is available here:
HMRC Employment Income Manual – EIM15045
How does this compare with private life insurance?
A standard personal life insurance policy paid for by an employer does not normally receive the same tax treatment.
Relevant life insurance was specifically designed to allow employers, particularly smaller companies, to provide individual death-in-service style cover in a tax-efficient way.
If you’re comparing the two, see our guide to relevant life insurance vs personal life insurance.
Frequently asked questions
Is relevant life insurance a benefit in kind?
Normally no, provided the policy satisfies the qualifying conditions for relevant life insurance.
Do I need to include relevant life insurance on a P11D?
In most cases, no.
Does the company pay National Insurance on the premiums?
Qualifying relevant life premiums do not normally give rise to Class 1A National Insurance contributions because they are generally not treated as a taxable benefit in kind.
Can HMRC challenge the tax treatment?
As with any tax relief, the policy must satisfy the relevant legislative and HMRC conditions. If it does not, the normal tax treatment may not apply.