Limited-company director

Raj

41, runs his own consultancy. No employer benefits at all, but big tax-efficient protection options through the company

Snapshot

Age	41
Family	Married, two children aged 10 and 7
Job	Director and 100% owner, software consultancy Ltd Co
Income	£20,000 PAYE + £85,000 dividends = £105,000 total
Wife	At home for now, returning to teaching once kids older
Home	£625,000, mortgage £380,000, 18 years remaining
Mortgage payment	£2,180 per month
Savings	£45,000 in company + £30,000 personal ISAs

What Raj has today

Zero employer sick pay. Raj IS the employer.
Only the £20,000 PAYE element qualifies for SSP, capped at £123.25 per week.
No employer death-in-service.
No critical illness through work.
No income protection through work.

The gap

If Raj is ill, the consultancy stops earning. Salary stops. Dividends stop. Within 3 months the household is using savings to pay the mortgage.
If Raj dies, his wife inherits the home with £380,000 of mortgage and no income source. £75,000 savings is 9 months of mortgage payments.
Big opportunity most directors do not know about: Relevant Life cover paid by the company is fully tax-deductible against corporation tax, written in trust for the family, with no benefit-in-kind on Raj personally.
Executive Income Protection through the company is similarly tax-efficient.

Recommended cover, built in three tiers

Tier	What it includes	Indicative /month
Basic	Relevant Life policy £500,000 level term 20 years, paid by the company, fully tax-deductible. Roughly 30-40% cheaper net cost than personal cover.	£60-75 (paid by company)
Enhanced	Adds Executive Income Protection through the Ltd Co. £5,000 per month benefit, 13-week waiting period, ceases at 65. Tax-deductible.	£200-260 (paid by company)
Comprehensive	Adds personal Critical Illness Cover £100,000 (CIC cannot be Relevant Life) plus Family Income Benefit £4,000 per month for 13 years.	£295-380 total

Cumulative build. Each tier adds to the previous, not a flat choice. These are example structures. Your adviser will tailor cover to your budget, health, family and mortgage needs. Premiums indicative for a non-smoker in good health, subject to medical underwriting.

The case

Raj is the highest-risk persona in this set and the one who knows it least. He has no safety net at all. Every employed persona has something from their employer. He has nothing.

The good news is the tax efficiency available to him is enormous. Relevant Life paid by the company, with the premium fully deductible against corporation tax and no benefit-in-kind on him personally, is approximately 30-40% cheaper than personal cover for the same protection. Executive Income Protection works the same way.

Most Ltd Co directors do not know any of this. They buy personal life cover out of dividend income that has already been through corporation tax and dividend tax. The same protection structured through the company saves them thousands over a 20-year term.

Common questions

I'll just save more instead.

£75,000 of savings is 9 months of mortgage and lifestyle. After that, the family is in real trouble. Saving more does not scale to the actual risk.

I'd just go back to PAYE if I got ill.

If you are seriously ill enough that the company cannot function, you are not going back to PAYE either. And PAYE comes with notice periods, recruitment time, and probably lower income.

Sounds expensive.

Most of it is paid by your Ltd Co, not by you personally, and is fully deductible against corporation tax. Net cost to you is 30-40% lower than buying personal cover from post-tax dividend income.

Illustrative example. This scenario is a composite, not a real client. Premium ranges are indicative for a non-smoker in good health and are subject to medical underwriting. The cover described may not be suitable for everyone. We strongly recommend speaking to an adviser before taking out any protection policy.

Major Money Matters Ltd is an appointed representative of Sesame Ltd.

Your situation will be different

Every scenario on this site is illustrative. Your actual cover depends on your income, family, mortgage, health and goals. The only way to know what fits is to talk to an adviser.

Book a protection review

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What our clients say

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