Why directors choose income protection

• Company-funded premiums: Your business pays the premiums, which are normally deductible against corporation tax.
• No benefit-in-kind: Because the company owns the policy, you aren’t taxed on the premiums and neither is your company.
• Higher levels of cover: Executive plans can typically insure up to 80% of your pre-incapacity earnings and dividends.
• Flexible options: Choose the deferred period and benefit term that suits your budget and how long you could cope without income.
• Peace of mind: Ensure your business and household finances continue uninterrupted while you recover.

How setup works

1. Estimate cover: Think about your monthly income (salary and dividends) and how much of it you’d like to insure. Our guide to how much income protection you need explains how to calculate the right level.
2. Request quotes: Fill in our simple form on the Get a quote page. Our regulated partner, Broadbench Ltd, will source quotes from leading insurers.
3. Application: When you’re happy with a quote, your company applies for the policy. Premiums are paid from your business account. There is no P11D reporting requirement.

Common questions

Is executive income protection tax-efficient?
Yes. Premiums paid by your company are normally an allowable business expense, so they reduce your corporation tax bill. You won’t personally pay income tax or National Insurance on them. Learn more in our guide to income protection tax rules for directors.

How are payouts taxed?
If your company makes a claim, the monthly benefit is paid to the business and treated as trading income. When you draw the funds as salary or dividends, normal taxation applies. Payouts from personally funded policies are tax-free because you’ve already paid tax on the premiums.

How much cover can I take out?
Executive policies can insure up to around 80% of your pre-incapacity salary and dividends, often with a maximum of £25,000 per month. Personal plans typically cover up to 65% of your income. See short-term vs long-term cover for more detail on benefit periods.

What about sole traders?
Sole traders and freelancers can take out personal income protection policies, which pay a tax-free income if you can’t work. You won’t get corporation tax relief on the premiums because you don’t operate through a company, but the policy can still provide vital financial security. Read more about income protection for contractors and freelancers.