The short answer is no. Not all business insurance premiums are deductible and the area is complex as every policy seems to differ.
In general the following rules apply:
Personal Illness and Accident Insurance
- The premiums are not deductible.
- The good news is that any income (or proceeds) paid out isn’t taxable either. These payments are called “exempt income”.
Income Protection and Loss of Earnings
- Premiums are generally deductible. It doesn’t matter if you are self-employed or on a PAYE salary.
- Any proceeds received are taxable as you will be receiving personal income.
Shareholders’ Insurance
It’s quite common for firms with more than one shareholder to arrange to cross-insure one another. Each shareholder owns a policy (or interest in a policy) that covers the life of the other shareholders.
This is done to cover the situation where one shareholder dies and the remaining shareholders can buy out the deceased person’s shareholding. The proceeds are then applied to the deceased shareholder’s estate.
- The premiums are not deductible.
- The proceeds are not taxable as the the policies are not intended to produce income for the shareholders.
Every policy is different and so these rules are only intended as a general guide. We are happy to have a look at your particular circumstances to see what rules apply.
