No: life insurance is exempt from VAT, so the premium you pay carries no VAT. HMRC's VAT notice on insurance (last updated 25 March 2026) says "Insurance transactions are exempt from VAT." Insurance Premium Tax is a separate charge, and HMRC's Insurance Premium Tax notice lists life insurance among the contracts exempt from it.

Premiums for your own age and health can be discussed through the form on this page, which arranges a free call-back; the broker is FCA-authorised and can explain what is on offer.

Is life insurance exempt from VAT?

Yes. HMRC's notice sets out the law behind this as "The Value Added Tax Act 1994, Schedule 9, Group 2." Group 2 is the part of the Act that exempts insurance, and HMRC's own words for the result are "Insurance transactions are exempt from VAT."

In plain terms, the insurer does not add VAT to the premium, so nothing on a policy schedule or Direct Debit is a VAT amount. That is why whether life insurance is vatable has a short answer: not on the premium.

The notice is written for the insurance trade rather than customers, and it speaks of insurance transactions in general rather than listing term, whole of life and critical illness cover one by one. There is no statutory definition of insurance, the notice says, so it relies on one from the Court of Justice of the European Union: an insurer undertakes, "in return for prior payment of a premium", to provide the insured with the agreed service when the risk covered happens.

Is Insurance Premium Tax charged on life insurance?

HMRC's guide to Insurance Premium Tax (last updated 6 March 2019) calls it "a tax on insurers and covers general insurance premiums", and HMRC's fuller Notice IPT1 (last updated 31 July 2026) names life cover in its list of exempt contracts: "life insurance, permanent health insurance and all other ‘long term’ insurance, except medical insurance".

The exception is medical insurance: IPT1 says cover of the kind found in private medical insurance or hospital cash plans is not exempt, even when written under a long-term contract. Where a life policy also carries an element of general insurance, the notice says insurers must split policies taken out after 1 December 1993 between the taxable and exempt parts, although de minimis rules may apply. If your policy bundles extras, the broker who rings back can go through which parts, if any, are taxed.

The two taxes should not be confused. HMRC's VAT notice says "Care should be taken not to confuse IPT with VAT, they’re 2 very different taxes." It also says "Unlike VAT, IPT cannot be recovered", which matters for the next question.

Can you or your business claim VAT back on life insurance premiums?

There is no VAT on the premium to claim. A VAT-registered business can deduct input tax in some situations: HMRC's notice says "As a VAT-registered business you’re entitled to deduct as input tax the VAT incurred on goods and services that you use or intend to use making taxable supplies." Input tax means VAT charged to you. Life insurance premiums do not have any charged, so a VAT return has nothing to take from them.

That covers a limited company paying for director cover, a partnership, a sole trader and a private individual alike. None of them can claim back VAT that was never added.

Being unable to reclaim VAT does not settle whether the premium reduces a tax bill in some other way. Corporation tax and income tax are separate questions with their own rules. For a company, the tax treatment of relevant life premiums is set out on its own page, and the position for sole traders is in our page on self-employed life insurance and tax deductions. For cover held by a company on a key employee, see whether key person insurance is tax deductible.

What about broker fees and add-on services?

Here the answer is less certain, so it pays to ask. HMRC's notice says "The VAT Act 1994 Schedule 9 Group 2 item 4 exempts (insurance) related services performed by insurance brokers and insurance agents when acting in an intermediary capacity." It goes on to say the services covered are those traditionally carried out by brokers or agents, such as arranging insurance contracts and handling later changes and claims.

If a firm charges a fee on top of the premium, or sells something alongside the policy, the exemption is tied to the service being an insurance related one supplied by a broker or agent acting as an intermediary. Which charges, if any, would apply to you is a point to raise when the broker phones.

Whatever the answer, ask any firm to show in writing what a quoted charge covers and whether VAT is included in it.

Do funeral cover and funeral plans follow the same rule?

Partly. For VAT, HMRC's notice treats some funeral plans as insurance: "Some funeral plans are written under contracts of insurance, so that on death a life insurance policy pays out the cost of the funeral." Those are exempt like other insurance.

A plan that works differently is treated differently. HMRC says: "Where a funeral plan represents pre-payment for a funeral it will not be exempt as insurance but will probably be eligible for exemption as the provision of a funeral". And for trust-based plans it says: "Management charges for funeral plans that are not insurance and are not prepayments, for example, where the client’s money is placed in a trust to be spent on a funeral on their death, will be liable to VAT at the standard rate." That last point is about the provider's management charges, so it is not a statement about what the buyer of a plan pays in total.

As a result, the answer for a funeral product depends on how the plan is built, which the paperwork from the provider should show. Tax rules can change, and this is the general position as read in November 2026, not tax advice.

Weighing cover for yourself or a firm? Send in the request on this page and a broker rings to discuss the choices, free.

Frequently asked questions

Is life insurance vatable?

No, not on the premium. HMRC says insurance transactions are exempt from VAT, so the insurer does not add it to what you pay.

Can I claim VAT on life insurance premiums?

No, because none is charged. The VAT-recovery rules in HMRC's notice apply to VAT that was added to a purchase, and a life policy premium has none added.

Does life insurance attract VAT when a company buys it?

No. The VAT exemption applies to the insurance transaction itself, so a premium paid by a company carries no VAT, just as a personal one does. Income tax and corporation tax are different questions, covered in the relevant life guide.

Does a life insurance payout have VAT or other tax on it?

That is a separate question from the premium, answered on our page about whether a life insurance payout is taxable.

Can I get tax relief on personal premiums instead?

That depends on the kind of policy. The tax relief page sets out what HMRC's manual says about personal premiums.

Is critical illness cover subject to Insurance Premium Tax?

No. IPT1 describes critical illness cover, such as a lump sum paid on diagnosis of a serious medical condition, as a long-term policy and lists it as exempt from IPT. Other tax questions about cover are gathered in the trusts and tax guide.

Sources