Can I claim business insurance as a tax expense as a sole trader?

Yes. In 2026-27, most business insurance is an allowable expense: public liability, tools, van (on actual costs), employers' liability and professional indemnity. Cover for yourself, such as life insurance or income protection, is not.

The rules below follow GOV.UK, HMRC's manuals, the legislation and the 2026 tax return notes, as checked on 17 October 2026.

The test every policy has to pass

Section 34 of the Income Tax (Trading and Other Income) Act 2005 says a cost must be incurred wholly and exclusively for the trade. If it has more than one purpose, you can still deduct an identifiable part that is for the trade. HMRC's manual says whether a premium is allowable depends on what is insured and whether the cover was taken out for the business.

Policies you can claim

GOV.UK says you can claim for any insurance policy for your business, and gives public liability as its example. HMRC's manual and GOV.UK cover the other common ones:

• Tools and equipment. HMRC's manual allows annual premiums insuring the business's fixed assets, such as tools, against damage or loss, even on a new-for-old policy.
• Van insurance. GOV.UK lists vehicle insurance among the travel costs you can claim when you work out actual costs.
• Employers' liability. HMRC's manual allows premiums insuring against your legal liability to pay compensation to employees. GOV.UK says you must have it as soon as you become an employer, with cover of at least £5 million. There are exceptions, for example if you only employ a close family member.
• Professional indemnity. GOV.UK names professional indemnity premiums as an allowable cost, and HMRC's manual says the same of cover for negligence.
• Contract works cover. GOV.UK does not name it. Insuring the work you are doing for a customer is cover taken out for the business, so in our reading it passes the same test.

Policies you cannot claim

HMRC's manual says premiums a sole trader pays for life, accident or sickness cover for themselves are not allowable. That takes in life insurance, personal accident cover, income protection and sickness cover.

HMRC's manual does not name private medical insurance for the trader. It does say that medical spending on keeping or restoring good health is not generally allowable, and that wishing to enjoy good health is a purpose the courts treat as private by its nature, so the cost is disallowed. In our reading, private medical cover for yourself falls on the same side.

Van insurance and the mileage rate

If you use the flat mileage rate for your van, you cannot also claim its insurance. HMRC's manual says the rate covers buying, running and maintaining the vehicle, including insurance, vehicle tax and MOT. GOV.UK says that once you use the rate for a vehicle, you keep using it while that vehicle stays in the business.

If you claim actual costs and also use the van privately, HMRC's manual, in its car example, allows a proportion of the insurance, as long as the policy covers business use.

Home insurance when you work from home

HMRC's manual says that if your business use of the home has its own policy, that policy is allowed in full and no part of the household policy is. Otherwise, an appropriate part of the household premium can be allowed when part of the home is set aside solely for the business for a period. GOV.UK says to find a reasonable method of dividing home costs, for example by the number of rooms you use for business. Our guide on working from home covers the split.

Where insurance goes in your records

GOV.UK says Making Tax Digital (MTD) uses the same expense categories as Self Assessment.

The tax return notes name car and van insurance under car, van and travel expenses, property insurance under rent, rates, power and insurance costs, and indemnity premiums under professional fees. They do not name public liability, tools, employers' liability or contract works cover, so we have put these under the heading that names insurance.

If your self-employed turnover is under £90,000, GOV.UK says you can choose simpler categorisation and only record whether each transaction is income or an expense.

Annual premiums that cross two tax years

GOV.UK calls the cash basis the standard way for sole traders, and says you record an expense when you pay it. So on the cash basis, a year's cover paid in one go counts in the tax year you pay it.

Under traditional accounting, HMRC's manual says generally accepted accounting practice decides which period an expense falls in. Where your accounts properly spread a cost over more than one year, as those rules can require, there is no tax rule letting you deduct it all up front.

A worked example

A self-employed plumber on the cash basis pays these premiums in 2026-27 and claims actual van costs, with 80% business use:

If the plumber used the mileage rate for the van, the van line would be £0, because the rate covers insurance. This is an example only.

What this means for you

Cover that protects the business, its tools, its van and its customers comes off your profit. Cover that protects you as a person does not.

Steps to claim your insurance

1. Gather each policy schedule and the date and amount you paid.
2. Sort them into business cover and personal cover. Leave personal cover out.
3. For van insurance, check whether you use the mileage rate. If you do, do not claim it.
4. For a van used privately, or home insurance, work out and note the business share.
5. Record each premium under the matching MTD category in the table above.
6. Under traditional accounting, check whether your accounts spread any premium into the next year.

The free MTD check shows when MTD starts for you, and the trades section has more guides.