Can contractors claim professional indemnity insurance as a business expense?

Yes, professional indemnity insurance is tax deductible as an allowable business expense. HMRC considers business insurance as wholly and exclusively for business purposes, so contractors can deduct the full cost when calculating their taxable profits.

What types of contractor insurance are tax deductible?

All business insurance policies are tax deductible including professional indemnity, public liability, employers liability, business contents insurance, and cyber liability insurance. The insurance must be purchased for legitimate business purposes and be reasonable in cost.

Do I need receipts to claim insurance costs as expenses?

Yes, you must keep receipts and policy documents as evidence of your insurance costs. HMRC may request proof of your expenses during an investigation, so maintain complete records of all insurance premiums paid by your limited company.

Can umbrella company contractors claim insurance expenses?

Umbrella company contractors typically cannot claim insurance expenses as these are usually covered by the umbrella company. However, contractors working through their own limited company can claim all business insurance costs as allowable expenses.

What is the wholly and exclusively test for insurance expenses?

The wholly and exclusively test means insurance expenses must be 100% for business reasons with no personal element. Business insurance policies like professional indemnity and public liability easily meet this test as they protect your contracting business activities.

How much does professional indemnity insurance cost for contractors?

Professional indemnity insurance typically costs between £200-£2,000 annually depending on your profession, coverage limits, and risk factors. IT contractors often pay £300-£800 annually for £1-2 million coverage, while high-risk professions may pay more.

Can I claim personal life insurance through my limited company?

Personal life insurance is not tax deductible, but Relevant Life Policies (RLP) purchased through your limited company are allowable expenses. RLPs provide life cover for directors and can be up to 50% cheaper than personal policies.

What records should contractors keep for insurance expense claims?

Keep insurance policy documents, premium payment receipts, bank statements showing payments, and renewal notices. Store these records for at least 6 years and ensure invoices are in your company name rather than your personal name.

Can contractors reclaim insurance costs?

Last updated Feb 9, 2026

1 min read

Written by Jordan MaceyMAAT

Can contractors reclaim insurance costs?

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Business insurance costs can be reclaimed through your business and are eligible for Corporation Tax relief.

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