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Key takeaways
  • Income protection replaces part of your income if illness or injury stops you working, usually paid tax-free.
  • The self-employed have no statutory sick pay, so the safety net is whatever you arrange yourself.
  • Insurers typically cap cover at around 60% of gross income.
  • A longer deferred period (the wait before benefit starts) lowers the premium significantly.
  • Premiums you pay personally are from taxed income, but the benefit is then usually tax-free.

Estimate your cover

Quick estimate: how much income could you insure?
Insurers typically cap income protection benefit at around 60% of gross income, because the benefit is usually paid tax-free. This is a general illustration of the cap, not a recommendation or a quote. Real cover, cost and terms depend on your age, occupation, health and the deferred period you choose.

Why it matters more when you're self-employed

An employee who cannot work gets Statutory Sick Pay, and often more under an employer scheme. A sole trader or freelancer gets neither. If you cannot invoice, the income stops, while the mortgage, rent and bills do not.

Income protection fills that gap. Unlike critical illness cover (a one-off lump sum for specific conditions), income protection pays a monthly amount for as long as you cannot work, up to the policy term, across a very wide range of illnesses and injuries.

How much you can insure

Because the benefit is usually paid tax-free, insurers cap it at a percentage of your gross income, commonly around 60%, sometimes tiered (a higher percentage on the first slice of income, lower above it). The estimator above shows the typical ceiling.

You do not have to insure the maximum. Covering your essential outgoings rather than your full income is a common way to keep the premium affordable.

Deferred periods and what drives the cost

The single biggest lever on cost is the deferred period: how long you wait after becoming unable to work before the benefit starts. Common options are 4, 8, 13, 26 or 52 weeks. The longer you can self-fund from savings, the cheaper the cover.

The other drivers are your age, your occupation (manual and higher-risk trades cost more), your health, whether you choose a level or increasing benefit, and how long the benefit pays out (to retirement, or a capped number of years).

The tax position

For an individual policy that you pay for personally, the premiums come from taxed income and the benefit is then paid tax-free. That is the usual route for a sole trader.

If you run a limited company, an executive income protection policy paid for by the company works differently: the company can usually deduct the premiums, but the benefit is paid to the company and then to you through payroll, where it is taxed. Which structure works better depends on your setup, so it is worth modelling both.

Information, not advice. Take Home provides information and calculations, not regulated financial or tax advice. Your circumstances may differ and the figures here are illustrative for the 2025/26 tax year. Speak to a qualified adviser or accountant before acting on anything you read here.