Public liability insurance
Last checked 26 October 2026 · HMRC source
Public liability insurance premiums are an allowable business cost where the policy is taken out for the purposes of the trade. Public liability cover protects the business against claims from members of the public, customers, or visitors who suffer personal injury or property damage as a result of the business's activities. An employee who pays for insurance covering their own liabilities from their work may get a deduction in narrow circumstances.
Conditions
- GOV.UK's self-employed expenses guidance names this cover directly: under 'Insurance policies' it says you can claim for any insurance policy for your business, giving public liability insurance as its example. The cover protects against third-party claims for personal injury or property damage caused by the business's activities.
- Whether you must hold public liability cover, and at what level, is for your trade body, clients or contracts to say — check their rules. This page does not state a general legal requirement. Employers' liability insurance is different: GOV.UK says you must get it as soon as you become an employer.
- HMRC's Business Income Manual (BIM45500) states that whether insurance premiums are deductible from trading profits depends on what is insured and whether the insurance has been taken out for the purposes of the trade. For a sole trader, the wholly and exclusively rule behind that test is section 34 ITTOIA 2005.
- For a limited company the same manual test applies, and the wholly and exclusively rule is section 54 CTA 2009.
- Employees: section 346 ITEPA 2003 allows a deduction from earnings for a premium under a qualifying insurance contract, to the extent the premium relates to indemnifying the employee against a liability related to the employment, or to cover for certain costs and expenses connected with claims, proceedings or investigations relating to the employment (section 346(1), paragraphs B, BA and BB; EIM30509). HMRC's Employment Income Manual (EIM30505) says this includes employees who pay for or towards their own indemnity insurance. A contract qualifies only if it meets the conditions in section 349 ITEPA 2003, and HMRC says the effect of the first is to exclude from relief premiums for mixed policies that cover both qualifying and other liabilities (EIM30513). Whether a policy you hold qualifies is a question for an accountant.
Common mistakes
- Confusing public liability with professional indemnity insurance. Public liability covers physical injury or property damage caused to third parties by the business's activities; professional indemnity covers financial loss to clients caused by errors in professional services. Many businesses need both.
- Treating public liability cover as a substitute for employers' liability insurance. GOV.UK says employers must get EL insurance, which helps pay compensation if an employee is injured or becomes ill because of the work they do for you.
- Overlooking minimum cover requirements in trade body memberships or client contracts — check these to confirm the policy limit is adequate.
- An employee assuming no relief is possible for liability insurance they pay for themselves — section 346 ITEPA 2003 can give a deduction for a qualifying policy (see the conditions above).
What to keep
- Policy schedule showing the insured, indemnity limit, period of cover, and premium.
- Premium invoices or payment records.
Real-world example
A self-employed electrician attends clients' properties to carry out installations and repairs. He holds a public liability policy for his business at a cost of £780 per year. GOV.UK names public liability insurance as an example of an insurance policy for your business that you can claim for, so the premium is allowable.
Frequently asked
Not sure whether you actually need public liability cover? Whether it’s legally required depends on your trade and whether you employ anyone. Check what your business needs →
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Every figure, rule and status on this page traces to these GOV.UK and legislation.gov.uk pages, all read on 26 October 2026.
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