Business Protection for Cardiff Owner-Managed Companies

Relevant life cover is a life policy paid for by a limited company on behalf of a director or employee, with premiums treated as a tax-deductible business expense and no benefit-in-kind treatment on the individual. The policy is written into a discretionary trust, with proceeds paid outside the director's estate for inheritance tax purposes. For a higher-rate taxpayer drawing income through salary and dividends, the tax-equivalent saving against equivalent personal life cover is typically 30% to 50%, depending on the marginal rate and dividend tax position. The mechanics suit Cardiff limited company directors drawing salary plus dividends totalling £80,000 and up, where personal cover would be funded from post-tax income.

If both directors are working shareholders and the business would struggle to continue with one of them gone, yes. A cross-option agreement paired with life cover on each shareholder funds the surviving shareholder's purchase of the deceased's shares from the deceased's estate, avoiding the new shareholder being the deceased's family (who may not want to be involved) and the family being stuck with shares they cannot easily sell. The mechanics need careful drafting by a corporate solicitor and the life cover needs sizing against an agreed share valuation, reviewed annually. Specific policy recommendations are regulated-advice territory.

Both options exist. Personal income protection is funded by the individual from net pay, with benefits paid tax-free; executive income protection is funded by the company, with premiums treated as a business expense and benefits taxed as employment income when paid. For a higher-rate taxpayer director the executive route is usually more cost-efficient on a like-for-like basis. Cover sizing usually targets 50% to 70% of earnings, with a deferred period (4, 13, 26 or 52 weeks) chosen against the household's emergency fund and the director's role in the business. Underwriting varies by occupation class.