No: for an individual in the UK, income protection premiums are not tax deductible. You pay them out of income that has already been taxed, and in return HMRC's manual says the benefits are "generally tax free" where that is so, subject to the conditions below. A sole trader or partner cannot deduct them from trading profits either.

Should you want the cover itself looked at, sending your contact details through this page's enquiry box starts a free telephone conversation with a broker the FCA has authorised. Tax questions about your own accounts are for HMRC or an accountant.

This page describes what HMRC and legislation.gov.uk publish, as read in October 2026. It is the general position rather than tax advice, and tax rules can change.

Are income protection premiums tax deductible for an individual?

HMRC's guidance treats a personal policy as one paid for out of taxed income, and the tax on the benefits is built around that. HMRC's Insurance Policyholder Taxation Manual (page updated April 2022) starts from the position that "Payments received from sickness disability and unemployment insurance will usually form part of the recipient’s taxable income, unless specific provisions exempt them from tax." Section 735 of the Income Tax (Trading and Other Income) Act 2005 is one of those provisions, and it works only if no relief was given on the way in.

The Act says that "No liability to income tax arises under this Act in respect of an annual payment under an insurance policy if—", and then sets three conditions. The first is that the payment is a benefit under the part of the policy that insures against a health or employment risk. The second is that "no part of any premiums under the policy has been deductible in calculating the income of the insured for income tax purposes". The third is that the conditions in sections 737 and 738, and where they apply sections 739 and 740, are met.

So the two sides go together. You do not deduct the premium, and a claim is generally not taxed. For an individual there is no deduction to look for on a Self Assessment return.

Are the benefits tax free, and on what conditions?

HMRC's manual (page updated December 2022) puts the main rule this way: "From 6 April 1996 payments received from policies taken out to protect a person from sickness, disability or unemployment will generally be tax free where the premiums were paid out of taxed income." It lists the conditions for the exemption:

  • the insured person "did not receive income tax relief for the premiums paid for the policy";
  • the policy "insures against a qualifying health or employment risk";
  • the payments are "made during the qualifying period"; and
  • the policy is "a genuine insurance policy issued on arm’s length terms".

The manual adds that "There is no limit on the amount of payments that can be received free of tax." A qualifying risk, on the manual's page on risks and periods (April 2022), includes suffering "any physical or mental illness, or deterioration in an existing condition, as may be specified in the policy". Qualifying periods include the period "throughout which illness, etc., continued, including convalescence" and a period of reduced income, "ignoring payments received from the policy".

The manual explains that the exemption covers "payments that would otherwise be taxable as annual payments", which is how income protection pays out while a claim lasts. A critical illness policy pays a different way, and how the two products differ is in is critical illness cover the same as income protection?. Tax on a claim in full is on its own page, are income protection benefits taxable?.

Can a sole trader or partner claim the premiums as a business expense?

HMRC's Business Income Manual (page dated April 2016, BIM45560) says no. Premiums that a sole trader or partner pays for life, accident or sickness cover on themselves or a partner cannot be deducted when trading profits are worked out; the life cover side of that rule is in is life insurance tax deductible for the self-employed?. The manual calls such cover by its older name, permanent health insurance, and HMRC's policyholder manual notes that PHI policies "are often referred to as ‘income protection’ or ‘sickness insurance’ policies".

BIM45560 then describes the other side: "Similarly, the benefits payable under such policies are not trading income." It points the reader to section 735, saying the benefits are generally tax free. The pairing matches the manual's general introduction to insurance (BIM45500): "In most situations, if the insurance premiums are allowable deductions from trading profits, the receipts from the policy are taxable as trading income." and "Where no deduction is allowed, often the receipts are not taxable as revenue."

It also deals with a trader who sets money aside instead of insuring: sums put by "to form their own insurance funds should be treated as reserves and not as insurance premiums", and they are not deductible if they are to provide for payments to the trader or a partner on sickness, injury or death. Whether a self-employed person can get cover in the first place, and how insurers measure income, is a different question, in can self-employed people get income protection?.

If you work for yourself and would like cover priced against your own accounts, leave your details in the form here and a broker with FCA authorisation will phone you back; it costs nothing.

Does GOV.UK's list of allowable expenses change that?

It can look as if it does. GOV.UK's guidance on expenses (last updated November 2024) says "You can claim for any insurance policy for your business, for example public liability insurance." It describes self-employed people as sole traders and individuals in a business partnership, and also says that "Allowable expenses do not include money taken from your business for personal use."

That GOV.UK sentence is about insurance for the business. Cover on the owner's own life, accident or sickness is what BIM45560, quoted above, deals with, and the manual's introduction, BIM45500, gives the test HMRC applies: "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." Where a particular cost is unclear, GOV.UK's own advice is: "If you’re not sure whether a business cost is an allowable expense contact HMRC." Allowable expenses go on the Self Assessment tax return, and GOV.UK says "you should keep proof and records so you can show them to HMRC if asked."

What changes if a company or employer pays the premiums?

Everything above is about a person buying cover for themselves. When an employer or a limited company is the one paying, the question moves to the company's accounts. GOV.UK says that if you run a limited company, "you are not ‘self-employed’, even if you’re the owner and sole employee", and BIM45560 is written about sole traders and partners.

Company-paid cover on a director or senior employee, with its corporation tax and benefit in kind questions, is covered in is executive income protection tax deductible? and how executive income protection works. The company route for life cover is in what relevant life insurance is.

For employees in a group scheme, the manual page on employers' schemes (December 2022) says sick pay, for example, is free of tax "in proportion to the extent to which the employee had paid the premiums" from income after tax, that amounts funded by salary sacrifice "do not qualify as an employee contribution to premiums", and that "Any part of the payments they receive that do not qualify for the exemption will be taxed as employment income." Whether a particular scheme works this way is a question for the employer or the scheme's provider.

Frequently asked questions

Can I claim income protection insurance on tax?

Not as a deduction for a personal policy. The Act makes the tax-free treatment of benefits depend on no part of the premiums having been deductible, so premiums paid from taxed income are not claimed back through a tax return.

Is income protection a business expense for a sole trader?

HMRC's manual says premiums a sole trader or partner pays for sickness cover on themselves or a partner are not allowable in working out trading profits. Insurance for the business itself, such as public liability, is treated differently in GOV.UK's guidance.

How much of income protection is tax deductible?

None of the premium on a personal policy, as HMRC describes it, and the benefits are generally tax free as a result. A different split can arise where an employer is involved, as in the section on employer schemes above.

Is life insurance and income protection tax deductible?

For a personal policy, neither carries tax relief on the premiums. The position on life cover is set out in life insurance tax relief.

If an income protection quote is what you are after, post your details here and an adviser at an FCA-authorised firm will telephone, free of charge.

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