Usually not: if you are self-employed as a sole trader or a partner in a partnership, premiums on life insurance covering yourself or a partner are not an allowable business expense, so they do not reduce the profit you pay Income Tax on. The position is different for some cover the business takes out for its own trading reasons, and for limited companies, and this page sets out which is which as HMRC's manual and GOV.UK print it.

Wanting your own life cover looked at? Sole traders can request a phone call, at no cost, from a broker who has FCA authorisation, through the form on this page. How the premiums appear in your own accounts is a matter for an accountant or HMRC.

What does HMRC say about a sole trader's own life cover?

HMRC's Business Income Manual, on its page about a trader's own policies (BIM45560), says that premiums for life, sickness or accident insurance a sole trader or partner takes out on themselves, or on a fellow partner, are "not allowable deductions in computing trading profits".

The same page deals with the money coming back out: the benefits payable under such policies "are not trading income". What a life insurance payout means for tax in your own circumstances is on is a life insurance payout taxable in the UK?, and the sickness side of this rule is in is income protection tax deductible?.

It also covers a trader who puts money aside instead of buying a policy. Those sums are treated as reserves rather than premiums, and are not deductible where they are meant to provide for the owner or a partner if they fall ill, are injured or die. HMRC gives its reason: such payments come out of profits "after they have been earned" and are "not expenditure incurred in earning the profits".

This is the general position as the manual stood when read in October 2026, and tax rules can change, so confirm the current wording with HMRC or an accountant before relying on it.

Why is personal cover not a business expense?

A business expense has to pass the "wholly and exclusively" test. HMRC's overview of it (BIM37007) explains that section 34 of the Income Tax (Trading and Other Income) Act 2005 stops a sole trader deducting spending unless it is incurred wholly and exclusively for the purposes of the trade, profession or vocation. HMRC reads that as a test of the taxpayer's "sole purpose".

Spending with two reasons behind it is treated strictly. If one reason is not a business one, HMRC says the spending fails the test, and the law has no provision allowing a "business" proportion. The manual separates that from a case where a definite part of a cost is wholly for the trade, which can be claimed for that part.

GOV.UK's guidance on self-employed expenses points the same way: "Allowable expenses do not include money taken from your business for personal use." A policy that pays your family if you die is cover on your own life, which is where BIM45560 puts it. HMRC's insurance chapter (BIM45500) starts from the same point: "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."

If you are unsure whether a given arrangement counts as personal or business cover, the broker can set out the options when they ring, and your accountant can advise on the accounts.

Which insurance can a self-employed person deduct, and which cover is different?

GOV.UK's page on legal and financial costs says "You can claim for any insurance policy for your business, for example public liability insurance." It names professional indemnity premiums as a claimable cost too. Those policies protect the business against its own liabilities. They are not cover on your life.

Cover on the life of a person whose work the business depends on is a separate, narrower category. HMRC's manual on insurance for employees and other key persons (BIM45525) says an employer may insure against loss of profits from the death, critical illness, sickness, accident or injury of an employee, director or other key person, and that the premiums "will be allowable if all the following conditions are met":

  • the "sole purpose" of the insurance must be meeting a loss of trading income that may follow from losing the key person's services, "and not a capital loss";
  • for life policies, the cover must be term insurance, "providing cover only against the risk that one or more of the lives insured dies within the term of the policy, with no other benefits", and the term "should not extend beyond the period of the employee's usefulness to the company".

The manual adds that premiums on whole life or endowment policies, or on critical illness or accident policies with an investment content, are capital expenditure and will not be deductible. For an unincorporated business, premiums on an endowment policy taken out on a key person as a condition of long-term finance are also not deductible, because they are not "incidental" costs of getting the finance in the manual's sense.

BIM45525 is written about an employer insuring an employee, director or other key person, and HMRC's insurance chapter (BIM45500) lists it as a separate heading from a trader's own health policies (BIM45560), the page quoted above on cover for a sole trader or partner. Which heading a particular policy falls under is a question for HMRC or an accountant. The business-side rules, the effect on the payout and the HMRC wording are in is key person insurance tax deductible?, and whether a sole trader or partner can insure themselves or each other for the business is on key man insurance for a sole trader.

Which options suit someone working for themselves, from term cover to income protection, is in life insurance for the self-employed.

What if you run a limited company instead?

GOV.UK is clear that "If you run a limited company, you are not ‘self-employed’, even if you’re the owner and sole employee", and that the company's costs are worked out for Corporation Tax instead. How a company's payments for a director's relevant life cover are treated is set out on relevant life insurance tax treatment.

How do you claim expenses, and who can check?

GOV.UK says that you tell HMRC your allowable expenses for the tax year on your Self Assessment tax return, that you do not need to send proof in with it, and that "you should keep proof and records so you can show them to HMRC if asked." For a cost you are unsure about, GOV.UK's advice is "If you’re not sure whether a business cost is an allowable expense contact HM Revenue and Customs ( HMRC )."

If you work alone and want to hear how cover might be arranged, you can request a call; the enquiry form here is free to use and the FCA-authorised broker who phones does not charge either.

Frequently asked questions

Can a self-employed person write off life insurance against tax?

Not for cover on their own life. HMRC's manual treats premiums for life cover on the sole trader or on a partner as outside the trading-profit calculation.

Does it matter if I pay the premium from the business bank account?

Paying from the business account does not change what the cost is for. GOV.UK says allowable expenses do not include money taken from your business for personal use, and BIM45560 makes premiums for life cover on yourself not allowable.

Can a sole trader claim life insurance a lender asked for?

HMRC's manual says that for unincorporated businesses, premiums on an endowment policy on a key person's life taken out as a condition of long-term finance are not deductible. Whether another type of policy a lender requires would be treated differently is something to take to HMRC or an accountant.

Do the same rules apply to partners in a partnership?

GOV.UK counts an individual in a business partnership as self-employed, and BIM45560 names partners alongside sole traders, including cover one of them holds on another partner. Whether a particular partnership policy falls under that rule or under the key person guidance is a question for HMRC or an accountant.

Does the payout become taxable if I cannot deduct the premiums?

HMRC's manual says the benefits from a sole trader's own policy are not trading income. The wider tax treatment of a payout is on the payout page linked above.

Sources