Is public liability insurance tax deductible?
Understanding the tax status of public liability insurance, a strongly recommended business expense, will be helpful in deciding how to factor it into your declared costs.
What is a tax-deductible expense?
A tax-deductible expense is a purchase deemed necessary and ordinary for business operations, whether you are a small, limited company or a sole trader. It can be claimed to reduce your tax bill.
Tax-deductible expenses include your running costs, things like bank interest on loans, and the cost of professional services, e.g. from an accountant or solicitor.
What does ‘tax deductible’ mean?
Tax deductible means you can deduct the cost of something from the amount you have earned, before working out how much tax you owe.
It does not mean you can deduct the amount you have spent from your tax bill.
Is public liability insurance a tax-deductible expense?
Public liability insurance for your business is tax deductible. This means it is a cost you can deduct when you are calculating your taxable profit. HMRC has included it as an allowable expense.
How do I claim public liability insurance as a tax-deductible expense?
You probably know how important it is to keep a record of business income and expenses for the purposes of working out taxable profits. You will also need to keep records so you can prove the accuracy of your calculations, should HMRC decide to check or investigate your business.
After calculating your profits, you can subtract your deductible expenses, including your public liability insurance, to arrive at your taxable profits. This is the figure on which your tax will be based.
Before you calculate your income and tax, we recommend you take professional advice from an accountant.
The claim will need to be a part of your annual tax calculations, accounts, and tax return. It is not necessarily something you will do at the time you buy your insurance.
How much will I recoup?
This will depend on a few factors including your income, insurance premium and tax bracket.
Again, you should consider taking professional advice from an accountant if you want an estimate of your tax bill and tax savings.