Is public liability insurance
tax deductible?

Yes. Public liability insurance is an allowable business expense: GOV.UK uses it as the example of an insurance policy for your business you can claim (GOV.UK). Landlords can deduct public liability cover for let property too (GOV.UK).

Public liability insurance is the policy most tradespeople and many other sole traders buy first. It covers claims if someone is injured or their property damaged because of your work. It is an allowable business cost, and GOV.UK uses it as its example of business insurance you can claim.

Is public liability insurance tax deductible?

The HMRC rule

Any insurance policy for the business, such as public liability insurance, is allowable. The rule comes from Insurance policies, Work out your rental income when you let property.

GOV.UK says you can claim for any insurance policy for your business, for example public liability insurance (legal and financial costs). Landlords can deduct insurance including landlords' policies for public liability (landlords). Only business costs are allowable (expenses overview).

When you can claim it

• Public liability insurance premiums.
• Employer’s liability insurance if you employ people.
• Tools, stock, goods in transit and business contents cover.
• Landlord public liability cover for let property.

When you cannot

• Personal liability cover on a household policy.
• Travel or life insurance for yourself.
• Claims settlements that relate to your personal life.
• Fines or penalties, which insurance cannot legally cover and are never allowable.

What to claim instead

If your household policy includes some business cover, such as business equipment at home, ask the insurer for the business part of the premium and claim that. A separate business policy is cleaner and fully allowable.

How to decide if you can claim it

1. Was it for the business? A cost is only allowable if you incur it wholly and exclusively for the business. If it also serves a personal purpose that cannot be separated, such as clothing that keeps you warm or a meal that keeps you going, HMRC disallows it.
2. Is part of it personal? Where a cost has a business part you can identify, such as the business calls on a phone bill or the business miles in a car, you claim that part and leave the rest out, on a reasonable basis you can explain.
3. Is it a running cost or something you keep? It is a running cost, so on the cash basis it counts when you pay it and on traditional accounting when you incur it. Nothing about it needs spreading over later years.
4. Is there a specific rule? For public liability insurance, the deciding rule is business insurance: any insurance policy for the business, such as public liability insurance, is allowable.

Worked example: a painter and decorator

A painter and decorator pays £220 a year for £2 million public liability cover, £140 for tools cover, and, when he takes on an apprentice, £180 for employer's liability insurance. All £540 is allowable.

Who needs it

Public liability insurance is not a legal requirement, but many clients, councils, venues and main contractors will not work with you without it. Tradespeople, cleaners, dog walkers, fitness instructors, event suppliers and market traders commonly carry it. Whether required or chosen, the premium is allowable.

Employer’s liability insurance

If you employ anyone, including part-time staff and, in many cases, family members, you must by law have employer's liability insurance of at least £5 million, with some exceptions for close family members. It is allowable, and failing to have it can lead to fines, which are not.

How much cover to buy

Public liability cover is commonly bought at £1 million, £2 million or £5 million, and some clients, councils and venues specify the level they need. The full premium is allowable whichever level you choose. If you take on a contract that requires higher cover, the extra premium is simply a cost of that work.

Landlords

Landlord policies often include property owner's liability, covering injury to tenants or visitors caused by the property's condition. The premium is an allowable letting expense, in box 24 of the UK property pages with other insurance.

Claims against you

If a member of the public claims against your business, the excess you pay is allowable, and so is compensation you pay yourself for business damage or injury, other than fines. Increases in premium after a claim are allowable in the normal way.

Tools, stock and vehicles

Insurance for tools, stock and goods in transit is allowable business insurance. Van insurance is a vehicle running cost, but not if you use mileage rates, which already include insurance. Car insurance for a car used partly privately is allowable only for the business share.

Where it goes

Public liability and other general business insurance go in other business expenses, box 30, or premises costs if they insure premises. Professional indemnity is the exception, in box 28. Landlords use box 24.

If you are a landlord

Landlords can deduct public liability cover for let property as part of their insurance costs (GOV.UK). It goes in box 24 of the UK property pages.

Where it goes on your return and in MTD

For a sole trader, the allowable part goes under other business expenses (SA103F box 30 on the full self-employment pages). Under Making Tax Digital for Income Tax, it goes in the same category of your quarterly update, which is the category TapTax files it under when you record the cost.

For a landlord, it belongs in rent, rates, insurance and ground rents (property) (SA105 box 24 on the UK property pages), and in the matching category of a Making Tax Digital property update.

If your turnover was under £90,000, you can use the short self-employment pages (SA103S), which ask for a single figure for total allowable expenses rather than a box-by-box breakdown, and the full pages let you give just a total in box 31 too. The category still matters for your own records and for Making Tax Digital, where each quarterly update uses the same categories unless you choose to send one consolidated figure.

Most sole traders now use the cash basis, the default from the 2024/25 tax year, which counts a cost when you pay it. On traditional accounting you count it when you incur it, and equipment you keep goes through capital allowances rather than expenses.

How much an allowable cost saves

The value of a deduction is the tax it removes from your profit, not the cost itself. At the basic rate a sole trader saves 26p for every pound of allowable expense, at the higher rate 42p, and in the personal allowance taper between £100,000 and £125,140 as much as 62p. Landlords pay no Class 4 on rental profit, so they save 20p or 40p.

What £1,000 of allowable expense saves a sole trader in 2026/27

• Basic rate (20% + 6%)£260
• Higher rate (40% + 2%)£420
• Additional rate (45% + 2%)£470
• Allowance taper band (60% + 2%)£620

Records to keep

Keep the policy schedule, the certificate and proof of payment for each year, and a note of what the policy covers. Where a policy bundles business and personal cover, keep the insurer’s breakdown of the premium.

From 6 April 2026, sole traders and landlords with qualifying income over £50,000 keep these records digitally and send quarterly updates under Making Tax Digital, falling to £30,000 from April 2027 and £20,000 from April 2028. The MTD requirement checker shows when it applies to you.

Common mistakes

• Claiming personal liability cover on a home policy.
• Claiming van insurance on top of mileage rates.
• Missing employer’s liability cover when taking on staff.

Related expenses

This item sits in the other business expenses category, alongside art and collectibles, care home fees, charity donations, clothing and workwear, cryptocurrency, fines and penalties, funeral costs and furniture. The A to Z of expenses answers the same question for every other cost.

TapTax sorts each cost into the right category as you record it, applies the business share where you set one, and keeps the receipts with the figures, ready for your quarterly updates and final return.