The tax position of Group Life Insurance actually makes it one of the most tax-efficient ways to offer Life Insurance.
You as the employer pay premiums for each employee. In most cases, HMRC considers premiums eligible for corporation tax relief.
When you set up the policy, you also arrange a trust with it. You either create a purpose-built trust just for your company or use the insurer’s more generic master trust. Read more about these two options here →
Either way, the trust firstly receives the payout from the insurer if an employee dies. The trust then pays the money out directly to the people or the charity the employee wanted to give the funds to.
This means the money doesn’t become part of the employee’s estate, so there’s no inheritance tax on the payout.