Essential guide to income protection for self-employed workers. When you're self-employed, you don't receive sick pay - your income stops immediately if you can't work. Income protection pays up to 70% of your self-employed income in tax-free monthly payments if you're unable to work due to illness or injury. Prove your income via SA302 tax returns, accountant's accounts, or bank statements. Compare whole of market quotes from LifePro from just 20p-a-day with 12-24 months trading history typically required.
By: Lorna Bailey Protection Expert Updated: 2nd January 2026
Yes, you can purchase anincome protection policyif you’re self-employed.
In fact, income protection can be particularly beneficial for those who are self-employed and don’t receive traditional sick pay benefits.
The tax-free monthly payments you receive can help to keep you afloat financially while you’re unable to work due to illness or injury.
LifePro can assist you find the right self-employed income protection policy to meet your needs, at the best available price.
Through our advised team you can compare prices from the whole of the market and receive personalised recommendations for your circumstances. contact us today for your fee-free quotes.
How much income protection do self-employed workers need?
The amount of income protection insurance you need depends on your individual circumstances and financial commitments. Most experts recommend covering 50-70% of your gross annual income, as this typically provides enough to maintain your standard of living if you're unable to work due to illness or injury.
When calculating how much cover you need, consider:
Your monthly mortgage or rent payments
Household bills and utilities
Childcare costs
Loan repayments and credit card bills
Daily living expenses for your family
Any savings you have that could cover short-term absences
Remember that income protection payments are tax-free, so you may not need to replace your full salary. The key is ensuring you can maintain your essential outgoings and standard of living during a period when you're unable to work.
To get an accurate quote tailored to your needs, use our free comparison service to compare quotes from 50+ UK providers, including Income Protection For Self Employed.
Proving your self-employed income for insurance applications
Self-employed applicants must prove their income via official documentation. Insurers need verification to determine your benefit amount.
Unlike employed workers who provide payslips, self-employed individuals need different documentation to verify income.
SA302 tax calculation (downloaded from HMRC online) - most common and preferred method
Accountant's letter or certified accounts confirming your income
Company accounts (if you operate through a limited company)
Bank statements showing regular business income (last 6-12 months)
Tax overview from HMRC showing declared income
Most insurers calculate your benefit based on the average of your last 2-3 years' income. This protects against artificially high claims based on one exceptional year.
Example calculation: Year 1: £28,000, Year 2: £35,000, Year 3: £42,000. Average: £35,000. At 70% cover = £24,500/year (£2,042/month benefit).
Important considerations for self-employed:
Newly self-employed (under 12 months trading) may struggle to get cover - most insurers require 12-24 months trading history
Fluctuating income can result in lower average calculations - consider providing 3+ years if available
Cash-only businesses without official records will find it very difficult to secure cover
Tax efficiency (taking low salary + dividends) may reduce your insurable income - discuss with broker
Some insurers use your lowest year rather than average - compare multiple providers
LifePro can advise on the best way to present your self-employed income to maximise your benefit amount while keeping premiums affordable.
Yes, self-employed workers can and should get income protection. Self-employed need it more because: No employer sick pay, No paid sick leave, Income stops immediately if unable to work, Must continue paying business costs. Income protection pays up to 70% of income if unable to work. You'll need to prove income via: SA302 tax return, Accountant's letter/accounts, Bank statements (last 6-12 months). Most insurers need 12-24 months trading history.
How is income calculated for self-employed?
Insurers calculate self-employed income via: Average of last 2-3 years (from tax returns), Net profit after expenses, May exclude one-off windfalls. Example: Year 1: £25k, Year 2: £35k, Year 3: £40k = Average £33.3k. Insurer covers 70% = £23.3k/year (£1,942/month). Important: Fluctuating income may result in lower cover. Keep accurate records. Some insurers use lowest year rather than average. Gross income vs net profit matters - usually based on net.
How much does income protection cost for self-employed?
Self-employed income protection costs depend on: Income level, Age, Health/smoking, Deferred period, Occupation risk. Example costs (35-year-old, £30,000 income, 26-week deferred): Office-based: £28-35/month, Trades/manual: £35-50/month. Self-employed may pay 5-15% more than employees due to: Income fluctuation, Tax complexity, No employer verification. Choose longer deferred period (13-26 weeks) to save 30-50% on premiums.
What deferred period should self-employed choose?
Deferred period is how long you wait before payments start. Self-employed should consider: Emergency fund (how many months can you survive?), Business costs that continue, Shorter deferred = higher premiums. Recommendations: If 6+ months savings: Choose 26-week deferred (cheapest), If 3-6 months savings: Choose 13-week deferred (balanced), If minimal savings: Choose 4-8 week deferred (expensive but fast protection). Longer deferred saves 30-50% on premiums but requires more savings.
Will income protection cover business expenses?
Income protection covers personal income only, not business expenses. What's covered: Benefit based on your salary/drawings (typically 70% of income), Personal bills, mortgage, living costs. Not covered: Business rent/rates, Employee salaries, Equipment costs, Supplier payments. Tip: Calculate total income needed to cover both personal AND business costs when choosing benefit amount. Some insurers offer business expense insurance separately. Self-employed should get both if business has ongoing costs.
Do I need accountant's confirmation for income protection?
Yes, most insurers require proof of self-employed income: SA302 tax return (from HMRC) - most common, Accountant's letter/accounts, Company accounts (if limited company), Bank statements (supplementary). When needed: During application (to determine benefit amount), When making a claim (to verify income). Important: Income must be verifiable via HMRC records. Cash-only businesses may struggle to get cover. Keep accurate tax records. 12-24 months trading history usually required.
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