Professional indemnity insurance
Last checked 18 June 2026 · HMRC source
Professional indemnity (PI) insurance premiums are an allowable business cost. PI cover protects the business against claims arising from professional negligence, errors, or omissions in the services provided to clients.
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Conditions
- Professional indemnity insurance premiums are explicitly listed as an allowable expense in GOV.UK's self-employed expenses guidance (updated November 2024). HMRC's Business Income Manual (BIM45515) confirms that 'premiums on an indemnity policy providing cover for professional negligence are allowable as a deduction.'
- PI insurance is often contractually required — many clients, particularly in financial services, legal, consulting, and creative professions, require contractors and suppliers to hold a minimum level of cover as a condition of engagement. Whether contractually required or voluntarily taken out, the premium is allowable provided the cover is wholly for the business.
- Many regulated professions are legally required to maintain PI cover. Solicitors, architects, financial advisers, accountants, and engineers (among others) must hold a minimum level of cover specified by their professional regulator. The cost is allowable regardless of whether PI insurance is a legal obligation or a commercial decision.
- Run-off cover — PI insurance taken out after a business ceases trading to cover claims that may arise from work done while it was operating — is also allowable. The policy continues to indemnify against professional negligence from past business activity, and the premium is a legitimate cost of that activity.
- For a limited company, PI premiums paid by the company are an allowable corporation tax deduction. Where the policy covers the professional liability of a director or employee personally (rather than the company entity itself), the premium is still allowable for the company because the cover supports the company's trade (BIM45520).
- Employees generally cannot claim PI insurance premiums as a personal tax deduction. In most employment situations the employer carries PI cover for the business. An employee in a regulated profession who is personally required to maintain their own cover would need to satisfy the strict 'wholly, exclusively and necessarily' test applied to employee expenses — a high bar in practice.
Common mistakes
- Confusing PI insurance with public liability insurance — they cover different risks. PI covers claims from clients alleging your professional work caused them a financial loss; public liability covers injury or property damage to third parties arising from your business activities.
- Treating run-off cover premiums as a non-allowable post-trading cost — run-off cover relates to work done during the trading period and the premium remains allowable.
- Underestimating the required cover level — many client contracts specify a minimum indemnity limit; check contract requirements against the policy limit before renewing.
What to keep
- Policy schedule showing the policyholder, indemnity limit, period of cover, and premium.
- Premium invoices or payment records.
Real-world example
A freelance management consultant is required by her main client contract to hold £1 million PI cover. She pays £1,200 per year for the policy. The premium is allowable in full — it is wholly incurred for the business, covering the risk of a claim arising from advice given to the client.
Frequently asked
Not sure whether you actually need professional indemnity cover? Whether it’s legally required depends on your trade and whether you employ anyone. Check what your business needs →
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Related allowances
Source: HMRC guidance