Executive Income Protection:
Business owners, your most valuable asset isn’t a product or a spreadsheet, it’s people. And when a key person like a business owner or director is unable to work due to illness or injury, the financial repercussions can be swift and severe. That’s where Executive Income Protection steps in: a tax-efficient way to provide income support while keeping the business running smoothly.
What Is Executive Income Protection?
Executive Income Protection is a business-funded insurance policy that pays a regular income to a key employee, typically a director, if they’re unable to work due to incapacity from illness or injury. Unlike standard income protection, it’s structured to give businesses flexibility, control, and tax advantages.
Key benefits of Executive Income Protection:
- Tax-Efficient Premiums: The business pays the premiums and may claim corporation tax relief (subject to HMRC approval), with no benefit-in-kind liability for the insured.
- Regular Income: Offers up to 80% of gross earnings (including dividends), paid monthly during a period of incapacity.
- Cover for pension contributions and NI: Can include pension contributions and National Insurance equivalents.
- Tailored Benefits: Policies can be customised by deferment periods, benefit lengths, and more to suit specific company needs.
Who Should Consider It?
- Owner-Directors who rely on a mix of salary and dividends
- Businesses with limited staff where each role is critical to operations
- Accountants advising entrepreneurial clients on risk management
How it works
The business takes out the policy and pays the premiums. If the insured individual becomes unable to work after a specified waiting period (known as the deferred period), the policy begins to pay out a monthly benefit.
This benefit can often cover:
- A percentage of the individual’s salary and dividends
- Employer pension contributions
- National Insurance contributions
Payments usually continue until the person returns to work, reaches the end of the policy term, or retires, whichever comes first.
Key Considerations
- Executive Income Protection should be structured to reflect the insured individual’s overall remuneration package, including salary, dividends, and employer pension contributions where applicable.
- Deferred periods, benefit levels, and policy terms should be carefully selected to align with both personal and business requirements.
Integration with Wider Planning
When paired with Relevant Life cover or Shareholder Protection, Executive Income Protection forms part of a resilient risk management strategy. It’s a practical way to protect continuity, preserve cashflow, and support the people who drive the business forward.
Get in touch
If you are a business owner and want to explore your options for income protection through your business, please get in touch to discuss your business needs with a financial planner who understands small business challenges.
Our initial consultations are at our expense and come with no obligation, these consultations will allow us to explore your Business Protection requirements but we can also cover other financial planning for business owners such as: planning for retirement, or preparing to sell your business.
Castle Rock Financial Planning offers expert guidance tailored to directors, shareholders, and owner-managed firms.
Castle Rock Financial Planning
📍 Suite 4, 20 The Ropewalk, Nottingham, NG1 5DT
📞 Call us: 0115 941 1617
07981795563
📧 Email: info@castlerockfp.co.uk
🌐 Visit: http://www.castlerockfp.co.uk
Approved by The Openwork Partnership on 20/05/2026
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
Castle Rock FP Team
