Self-employed car insurance

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Being self-employed and using a car for work will impact the type of car insurance you need. Insurance providers assess the level of risk based on the car’s usage (personal, commuting, or business).

The more time spent on the road for work, the higher the risk and premiums. For instance, a delivery driver will require business car insurance and can expect higher premiums compared to a home-based copywriter.

On a positive note, self-employed individuals may be able to claim car insurance as a tax-deductible expense.

Learn more about what you can claim when travelling if you are self-employed.

Does being self-employed affect car insurance?

When you’re self-employed and your job requires driving a vehicle, it will affect the type of car insurance you need. Insurance providers ask about the car’s purpose, whether it’s for personal use, commuting, or business activities.

This helps them determine the premiums based on the level of risk you present. The more time you spend on the road, the higher the risk of accidents and claims.

For instance, if you’re a delivery driver, you’ll typically require business car insurance, which tends to have higher premiums compared to policies for home-based copywriters or individuals who use their car for personal use only.

However, there’s good news for self-employed individuals who use their cars for work. In some cases, you might be able to claim the cost of self-employed car insurance as a tax-deductible expense.

This means you can potentially reduce your taxable income by deducting the car insurance premiums paid for business purposes. It’s important to consult with a tax professional or accountant to understand the specific rules and regulations regarding tax deductions for self-employed car insurance.

What type of car insurance do I need if I’m self-employed?

Personal use: If you use your car solely for personal activities like visiting friends or running errands, regular car insurance will cover you. You may need to add commuting coverage if you use your car to commute to work.
Work purposes: If you use your car for work, such as being a self-employed care worker who visits patients, you’ll need business car insurance. It’s important to ensure that any employees who drive their own vehicles for work are also covered for business use.

Classes of business car insurance:

Class 1: This class can provide coverage if you drive between different places of work or occasionally attend meetings.
Class 2: This class includes coverage for a named driver, typically someone you employ.
Class 3: Designed for individuals who travel extensively for work, such as door-to-door salespeople.
Specialised purposes: If you’re involved in delivering commercial merchandise or operating a private taxi, you will require a different kind of insurance specific to those activities. It’s important to explore specialised insurance options tailored to your specific business needs.

Private Taxi Self-Employed Car Insurance

What does self-employed car insurance cover?

In addition to covering your regular day-to-day driving activities, business car insurance can provide coverage if you use your car for the following purposes:

Travel between different work locations or offices: If your work requires you to visit multiple work locations or offices, business car insurance can cover your travel between these places.
Regularly visit clients or customers: If you frequently visit clients or customers as part of your self-employed business, business car insurance can provide coverage for these trips.
Drive colleagues or other employees on business duties: If you transport colleagues or other employees as part of your work responsibilities, business car insurance can offer coverage for such situations.
Drive to the bank or post office on work-related errands: If you need to make trips to the bank or post office for work-related purposes, business car insurance can cover these errands.
Use your car to get to training, conferences, or exhibitions: If you attend training sessions, conferences, or exhibitions as part of your self-employed work and use your car for transportation, business car insurance can provide coverage for these journeys.

It’s important to review and understand the specific coverage details of your business car insurance policy, as different insurance providers may have variations in the extent of coverage and specific terms and conditions.

Cover levels for self-employed car insurance:

Third-party insurance

Third-party insurance is the basic and minimum level of coverage required to drive on UK roads. It provides protection against damage caused to other people’s cars and property. However, it does not provide coverage for any damage to your own vehicle.

Learn more about third-party car insurance

Third-Party Fire And Theft Car Insurance

Third-party, fire and theft insurance

Third-party, fire, and theft insurance provides coverage for various scenarios. It protects your car in the event of theft or damage caused by fire. Additionally, it offers coverage for damage caused to other people’s cars and property.

Learn more about third-party, fire and theft car insurance

Fully comprehensive insurance

Fully comprehensive insurance provides the highest level of coverage. It includes all the features of third-party, fire and theft insurance, such as protection against theft and fire damage, as well as coverage for damage caused to other people’s cars and property.

Learn more about fully comprehensive cover

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Is car insurance tax deductible for self-employed people?

Yes, self-employed individuals can potentially benefit from tax deductions on car expenses if the vehicle is used for work purposes.

Car insurance is considered a running cost alongside fuel, parking fees, servicing, and repair costs, and can be claimed as an allowable business expense on the self-assessment tax return.

This means that self-employed individuals can seek tax relief on their car insurance premiums, reducing their taxable income.

However, it’s essential to accurately track and document all eligible car-related expenses and consult with a tax professional or accountant to ensure compliance with relevant tax laws and regulations.

What car expenses can I claim as self-employed?

You can claim allowable business car expenses for the following:

Motor insurance: The premiums paid for your car insurance can be claimed as an allowable expense.
Repairs and servicing: Expenses incurred for repairs and regular servicing of your vehicle are eligible for tax relief.
Fuel: The cost of fuel used for business purposes can be claimed as an allowable expense. It’s important to keep a record of business mileage to support these claims.
Parking: Expenses related to parking fees incurred during business-related activities can be claimed.
Hire charges: If you rent a vehicle for business purposes, the hire charges can be claimed as an allowable expense.
Vehicle licence fees: The fees associated with licencing your vehicle for business use can be claimed.
Breakdown cover: The cost of breakdown cover specific to your business vehicle is an allowable expense.

Related: Jeep car insurance

In addition to these expenses, you may be able to get tax relief for a portion of the vehicle’s purchase cost by claiming capital allowances. However, this is applicable only if you are not using simplified expenses.

It’s important to note that you cannot claim for normal commuting or domestic driving in order to obtain a car insurance tax deduction. The expenses claimed must be directly related to your self-employed business activities.

Keeping accurate records of your expenses and consulting with a tax professional or accountant will help ensure compliance with tax laws and regulations.

How to calculate your self-employed car expenses

To calculate your self-employed car expenses, particularly if you use your vehicle for both personal and business purposes, you need to determine the proportion of motoring costs that are associated with your business. Here are two common approaches:

Flat Rate Mileage: Instead of calculating the actual running costs of your vehicle, you can use a flat rate for mileage. HM Revenue and Customs (HMRC) sets approved mileage rates that you can use to calculate your business mileage expenses. You multiply the approved mileage rate by the total business miles travelled during the tax year to determine the deductible expense.
Proportion of Business Use: Another method is to assess the percentage of time you use your vehicle for business purposes. For example, if you determine that 70% of your vehicle usage is for business, you can apply this percentage to your total motor running costs for the tax year. This includes expenses such as fuel, insurance, repairs, servicing, parking, and vehicle licence fees. The resulting amount represents the portion of expenses you can claim as allowable business expenses on your tax return.

It’s important to keep accurate records of your business mileage or the proportion of business use to support your calculations. This will help ensure compliance with HMRC requirements and provide evidence in case of an audit.

Consulting with a tax professional or accountant can provide further guidance on calculating and claiming self-employed car expenses based on your specific circumstances.

Can I cut the cost of my car insurance if I’m self-employed?

Yes, whether you’re self-employed or not, there are various ways to reduce the cost of your car insurance. Here are five top tips:

Increase your voluntary excess: Consider opting for a higher voluntary excess amount. By agreeing to pay more towards making a claim, you can often lower your premium. However, ensure that the excess amount you choose is affordable in the event of a claim.
Pay upfront if possible: If you have the means to do so, paying for your insurance in a lump sum can be cheaper than opting for monthly installments. By paying upfront, you can avoid any additional charges or interest applied to monthly payments.
Shop around and compare quotes: Don’t settle for the first insurance quote you receive. Take the time to shop around and compare quotes at Comparoo from different providers. Prices can vary significantly, and by comparing options, you can find the best value for your coverage needs.
Consider your vehicle choice: The type of car you drive can impact your insurance premiums. High-performance or luxury vehicles tend to have higher insurance costs. Opting for a car with a lower insurance group rating can help reduce your premiums.
Improve your driving skills and security: Taking advanced driving courses or installing additional security measures, such as alarms or immobilisers, can make you a lower-risk driver in the eyes of insurers. This may lead to lower insurance premiums.

Remember, it’s important to review your insurance policy and coverage details carefully to ensure you have the necessary protection for your self-employed activities.

Top tips for getting cheap car insurance

Car insurance for taxi drivers

When you use your car as a taxi service, it’s important to have specialised taxi insurance. The cost of taxi insurance is influenced by various factors, such as your age, the type and size of the car you drive, your annual mileage, and the operating area.

If you drive a taxi that requires pre-booking, like a minicab or if you drive for services like Uber, private hire insurance is necessary. This type of insurance covers vehicles that can’t be hailed on the street or joined from a taxi rank.

On the other hand, if your taxi can be hailed on the street or accessed from a taxi rank, public hire insurance is required. This insurance is specifically designed for taxis operating in the public hire sector.

To ensure appropriate coverage for your taxi operations, it’s essential to choose the right type of insurance based on the nature of your taxi service.

Consulting with insurance providers that specialise in taxi insurance can help you navigate the options and find suitable coverage for your needs.

Car insurance for courier drivers

When using your car or van for courier services, it’s essential to have specialised vehicle insurance that provides coverage for you, your vehicle, and the goods you’re transporting.

Courier insurance is designed to protect you and your vehicle while ensuring coverage for the goods in transit. This type of insurance takes into account the unique risks and responsibilities associated with courier work.

It’s important to note that there is a distinction between courier delivery and haulage delivery. Courier delivery typically involves transporting smaller packages or goods, often on a same-day or next-day basis. Haulage delivery, on the other hand, usually refers to the transportation of larger loads over longer distances.

To ensure proper coverage for your self-employed courier work, it’s crucial to select the right type of insurance that aligns with the specific nature of your operations.

Consulting with insurance providers experienced in providing coverage for courier drivers can help you find the appropriate insurance policy that meets your needs and protects your business.

How much can you save on your car insurance?

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What do I need to get a self-employed car insurance quote?

To get a self-employed car insurance quote, you’ll need to provide the following details:

Your car: Provide the registration number, make, and model of your vehicle.
Usage and mileage: Specify how you use your car and estimate the average number of miles you drive per year.
No-claims discount: Inform us about the number of years you have accumulated for your no-claims discount. This reflects the number of claim-free years you have had.
Driving history: Share information about your driving history, including any previous accidents, driving convictions, or past insurance claims.
Additional drivers: If you wish to include any additional named drivers on your policy, let us know and provide their details.

By providing these essential details, you can receive accurate and tailored quotes for self-employed car insurance. Remember to provide accurate and honest information to ensure the quotes reflect your specific circumstances accurately.

Frequently asked questions

Is self-employed car insurance more expensive than standard car insurance?

Yes, self-employed car insurance typically comes with higher costs compared to standard car insurance. There are a few reasons for this:

Increased time on the road: Self-employed individuals who use their cars for business purposes tend to spend more time driving. With increased mileage comes a higher risk of accidents and potential claims, which can contribute to higher insurance premiums.
Occupation-specific risks: The price of self-employed car insurance also depends on what you do for a living. Certain professions or business activities may carry higher inherent risks, such as delivery drivers or those involved in high-risk industries. Insurance providers take these factors into account when calculating premiums.
Usage patterns: Insurance rates can vary based on how you use your car for business purposes. Factors such as the frequency of business trips, type of driving (urban or long-distance), and the size of the vehicles being insured can impact the insurance cost.

Related: Group 2 car insurance

It’s important to note that while self-employed car insurance may be more expensive, it provides the necessary coverage for the specific risks and requirements associated with business use.

It’s advisable to compare quotes from different insurance providers to find the most suitable coverage at competitive prices for your self-employed car insurance needs.

Do I need to tell my insurance provider I’m self-employed?

Yes, it’s important to inform your insurance provider that you’re self-employed to ensure you have the appropriate coverage for your specific needs.

Failing to disclose your self-employed status to your insurance provider can have consequences. In the event of making a claim on your car insurance in the future, if it is discovered that you have been using your car for business purposes without notifying your insurer, there is a high likelihood that your policy will be invalidated.

It is crucial to be transparent and honest with your insurance provider about your self-employment status and the usage of your vehicle.

By notifying your insurance provider of your self-employed status, you can obtain the right coverage that aligns with your business activities and mitigate the risk of potential coverage gaps or policy invalidation.

Always prioritise open communication with your insurance provider to ensure you have the appropriate level of coverage for your needs.

What if my job changes after taking out self-employed car insurance?

If there are any changes to the nature of your work, it’s important to inform your insurance provider. This applies whether you have switched occupations entirely or have returned to working for an employer.

Your job title and profession are taken into consideration by insurance providers when determining your premium, as certain occupations are perceived as higher risk than others.

By notifying your insurance provider about any job changes, you can ensure that your coverage remains accurate and relevant to your new employment circumstances.

Failure to update your insurer about job changes may result in potential coverage gaps or discrepancies in your policy. It’s essential to maintain open communication with your insurance provider and provide them with the necessary information to ensure that your policy reflects your current employment situation accurately.

Remember to review your policy terms and conditions or consult with your insurance provider directly to understand any specific requirements or procedures for updating your policy in the event of a job change.

Should I take out GAP insurance if I’m self-employed?

While GAP insurance is not mandatory, it can be a beneficial addition to your self-employed car insurance coverage.

GAP insurance is specifically designed to bridge the gap between the market value of your car and the remaining balance on your car finance agreement. As a self-employed individual focused on the success of your business, it’s important to avoid getting into additional debt. In such cases, GAP insurance can provide valuable financial protection.

By considering GAP insurance, you can safeguard yourself against potential financial losses in the event of an accident or theft that results in the total loss of your vehicle. This coverage ensures that you are not left with outstanding finance payments that exceed the actual value of your car.

Before making a decision, carefully evaluate your specific circumstances, including the value of your vehicle, the amount owed on your car finance agreement, and your risk tolerance. It may be beneficial to consult with an insurance professional who can provide guidance on whether GAP insurance is a suitable option for your self-employed car insurance needs.

Can I claim the cost of my car if I am self-employed?

Yes, as a self-employed individual, you can claim the cost of your car as a business expense.

To determine the amount you can claim, calculate your total motor running costs for the year, including expenses such as fuel, maintenance, insurance, and road tax.

Then, apply the percentage of business use (typically 60%) to arrive at the portion of these expenses that can be claimed. Additionally, if you took out a loan specifically for purchasing the vehicle, you can claim the interest on that loan as a deductible expense.

It is important to keep accurate records of your expenses and consult with a tax professional or accountant to ensure compliance with tax regulations and maximise your eligible deductions.

Can you have a company car if self-employed?

Yes, as a self-employed individual, you can have a company car through a business car lease. Being self-employed, you are classified as a sole trader and are eligible for a business car lease.

However, it’s important to note that there are additional criteria that must be met before leasing a car, which may vary depending on the leasing company and specific lease agreements.

It’s advisable to consult with leasing providers or financial advisors to understand the requirements and options available to you as a self-employed individual seeking a company car lease.

How many miles can I claim self-employed?

As a self-employed individual, you can claim a mileage allowance for business purposes. The current mileage rates for sole traders are as follows:

45p per mile for the first 10,000 business miles travelled in a car or van.
25p per mile for any additional business miles travelled thereafter.

These mileage rates represent the amount you can claim as an allowable expense for the miles driven during business-related activities. It’s important to keep accurate records of your business mileage, including dates, destinations, and purposes, to support your mileage claims.

Consulting with a tax professional or accountant can provide further guidance on claiming mileage allowances and ensuring compliance with tax regulations.

Learn more about how many miles you can claim being self-employed