**Take Home**

    Protection · 2025/26

# Income protection for the self-employed

Income protection pays you a regular, usually tax-free, income if illness or injury stops you working. For the self-employed it matters more than for most employees, because there is no sick pay and no employer behind you. Insurers typically let you cover up to around 60% of your gross income. Here is how it works and what drives the cost.

      CB

        [Charlie Bailey](https://www.linkedin.com/in/charliebaileyy/) · Founder, Take Home · 6 years in UK accountancy
        Published 2026-05-30 · Updated 2026-05-30 · 3-min read

    On this page
- [Estimate your cover](#calc)

      - [Why it matters when self-employed](#why)

      - [How much you can insure](#how-much)

      - [Deferred periods and cost](#deferred)

      - [The tax position](#tax)

      - [FAQ](#faq)

##

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?

      Your gross annual income (£)

    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.

    The whole picture

## See where protection fits your finances.

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    [Join the waitlist →](/contact)

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    FAQ

## Frequently asked

      What is income protection for the self-employed?

It is insurance that pays you a regular income, usually tax-free, if illness or injury stops you working. It matters for the self-employed because there is no statutory sick pay and no employer scheme to fall back on.

      How much income can I protect?

Insurers typically cap the benefit at around 60% of gross income, because it is usually paid tax-free. You can insure less than the cap, for example just your essential outgoings, to reduce the premium.

      How can I make income protection cheaper?

The biggest lever is the deferred period, the wait before the benefit starts. Choosing 13 or 26 weeks instead of 4 weeks cuts the premium, as long as you have savings to bridge the gap. Insuring a lower benefit and choosing a level rather than increasing benefit also reduce cost.

      Is income protection benefit taxable?

For a personal policy you pay for yourself, the benefit is usually tax-free because the premiums came from taxed income. A company-paid executive income protection policy is treated differently: the company deducts the premiums and the benefit is taxed when paid to you.

      Is income protection the same as critical illness cover?

No. Income protection pays a regular monthly income for as long as you cannot work, across a wide range of conditions. Critical illness cover pays a single lump sum on diagnosis of specific listed conditions. They cover different risks.