Public liability insurance

Yes

Public liability insurance premiums are fully deductible as a business expense for sole traders. This is one of the clearest costs you can claim in the trades. HMRC has no ambiguity here.

Common questions

Can I claim public liability insurance as a plumber/electrician/builder?

Yes, in full. Trade insurance is a wholly business expense.

Do I have to hold public liability insurance, and does that change the claim?

No trade is legally required to hold public liability cover (unlike employer's liability, which becomes compulsory the moment you employ anyone), but many clients, sites and trade bodies insist on it. Required or voluntary, a premium covering your trade risk is deductible either way.

I pay my premium monthly and the insurer adds a credit charge. Can I claim the whole cost?

Yes. Both the premium and any instalment interest or credit charge the insurer adds are part of the business cost of the cover.

My insurer paid out on a claim. Is the payout taxable?

A liability payout normally goes to the third party who claimed against you, so nothing lands in your accounts. Where a payout does reimburse a cost you claimed, or replaces lost business income, it counts as a business receipt and belongs in your figures. For a large or unusual payout, check the treatment with an accountant.

Watch out for

Combined policies that include personal cover (e.g. personal accident) should have only the business portion claimed if a split is identifiable.
Employer's liability insurance is a legal requirement as soon as you employ anyone, and some subcontractor arrangements count as employment for this purpose, so check who counts as an employee on GOV.UK. It is deductible on the same basis as public liability.
Tool cover bundled into a trade policy is still a business cost. Claim it with the rest of the premium.

Common mistakes

Claiming the personal-accident or personal legal cover element of a combined policy in full. Only the business cover qualifies.
Missing the instalment or credit charge when paying monthly. It is part of the cost and claimable.
Forgetting that a payout reimbursing a cost you claimed is itself a business receipt.

Cash basis vs traditional accounting

Premiums are a day-to-day running cost on both methods. On cash basis, deduct what you actually paid in the year, including where an annual policy is paid monthly. On traditional accounting, an annual premium spanning your year end is apportioned across the two years.