Correct as of June 2023.
Does being self-employed affect car insurance?
If you’re self-employed and drive a vehicle as part of your job, then it will affect the type of motor insurance you need.
When you apply for car insurance, providers will want to know what you use your car for – personal use, commuting or for business purposes. This is so they can work out your premiums based on the level of risk you pose. The more time you spend on the road, the greater risk there is of you having an accident and making a claim.
So, for example, a delivery driver will need business car insurance and should expect to pay more for their premiums than a home-based copywriter.
If you use your car for work, the good news is, you might be able to claim self-employed car insurance as a tax-deductible expense.
What type of car insurance do I need if I’m self-employed?
If you’re self-employed and your car is just for personal use – like visiting friends or going to the shops – regular car insurance will cover you. If you use your car to commute to work, you may need to add cover for commuting.
But if you use your car for work purposes, for example, if you’re a self-employed care worker who drives to visit patients, you’ll need to have business car insurance. And you’ll need to make sure any employees driving their own vehicles for work are covered for business use.
Classes of business car insurance
There are three classes of business car insurance:
- Class 1 can cover you if you drive between different places of work or occasionally drive to meetings.
- Class 2 can include a named driver – typically, someone you employ.
- Class 3 is for people who travel a lot for work. A door-to-door salesperson, for example.
If you’re delivering commercial merchandise or driving a private taxi, you’ll need a different kind of insurance.
What does self-employed car insurance cover?
As well as your normal day-to-day driving activities, business car insurance could cover you if you use your car to:
- Travel between different work locations or offices
- Regularly visit clients or customers
- Drive colleagues or other employees around on business duties
- Drive to the bank or post office on work-related errands
- Use your car to get to training, conferences or exhibitions.
Cover levels for self-employed car insurance:
This is the minimum level of cover needed to drive on UK roads. It covers you for damage to other people’s cars and property but won’t pay out for damage to your own vehicle.
Third party, fire and theft insurance
Covers your car if it’s stolen or damaged by fire, as well as damage to other people’s cars and property.
Fully comprehensive insurance
Includes everything that third-party, fire and theft insurance covers, along with accidental damage to your own car.
Is car insurance tax deductible for self-employed people?
Yes, if you use your car for work, you could get tax relief on your self-employed car expenses. Car insurance is counted as a ‘running cost’ of your vehicle, along with petrol, parking fees, servicing and repair costs, so you can claim it as an allowable business expense on your self-assessment tax return.
What car expenses can I claim as self-employed?
You can claim allowable business car expenses for:
- Motor insurance
- Repairs and servicing
- Hire charges
- Vehicle licence fees
- Breakdown cover.
You may also be able to get tax relief for part of the cost of buying a vehicle by claiming capital allowances – as long as you’re not using simplified expenses.
What you can’t do is claim for normal commuting or domestic driving in order to get a car insurance tax deduction.
How to calculate your self-employed car expenses
If you use your vehicle for both personal and business reasons, you can only claim expenses on your tax return for the proportion of motoring costs associated with your business.
There are a couple of ways to do this:
- You can either use a flat rate for mileage instead of calculating the actual running costs of your vehicle, or
- You can work out how much you use your vehicle for business (for example, 70% of the time) and apply this to your total motor running costs for the tax year.
Can I cut the cost of my car insurance if I’m self-employed?
Whether you’re self-employed or not, here are a few tips for getting cheaper car insurance.
- Consider increasing your voluntary excess – this is how much you agree to pay towards a claim. While this could help cut the cost of your premium, make sure you can afford your chosen excess if you make a claim.
- Pay for your insurance in one go, if you can afford to. Although paying monthly can spread the cost, you’re likely to be charged interest on the instalments.
- Shop around and compare quotes every time your car insurance is up for renewal. We can help you make great-value savings on your car insurance.
Car insurance for taxi drivers
If you use your car as a taxi service, you’ll need specialist taxi insurance. The cost of taxi insurance depends on several factors, including your age, type and size of car you drive, annual mileage and the area in which you drive.
If you drive a taxi that must be pre-booked, for example, a minicab or you drive for Uber, you’ll need private hire insurance. If your taxi can be hailed on the street or joined from a taxi rank, you’ll need public hire insurance.
Car insurance for courier drivers
If you’re using your car or van as a courier service, you’ll need a specialist type of vehicle insurance that covers you, your car or van and the ‘goods in transit’ – in other words, what you’re delivering.
There’s also a difference between courier delivery and haulage delivery, so make sure you get the right cover for your self-employed work.Courier van insurance
What do I need to get a self-employed car insurance quote?
To help you compare quotes for self-employed car insurance, we’ll need you to give us a few details about:
- Your car. We’ll need to know your registration number, as well as the make and model.
- How you use your car and how many miles you drive a year, on average.
- Your no-claims discount. Tell us how many years you have.
- Your driving history. Please tell us if you’ve been involved in an accident, if you’ve any driving convictions or if you’ve made a claim on your car insurance in the past.
- Additional drivers. Let us know if there are any other named drivers that you’d like added to your policy.
What our expert says...
“It’s important to keep in mind that not all self-employed people need business car insurance. It’s only necessary if you drive between places for work purposes. Regular car insurance will be just fine if your car is purely for personal use.”
- Alex Hasty, Motor insurance expert
Frequently asked questions
Is self-employed car insurance more expensive than standard car insurance?
Business car insurance is often more expensive than standard car insurance. This is because business drivers spend more time on the road, so there’s a greater risk of having accidents – and making claims.
The price of your insurance also depends on what you do for a living.
Do I need to tell my insurance provider I’m self-employed?
You’ll need to tell your insurance provider you’re self-employed to make sure you get the right cover for your needs.
If you don’t notify your insurance provider and you make a claim on your car insurance in the future, there’s a good chance your policy will be invalidated if it comes to light you’ve been using your car for business purposes. Always be upfront and honest.
What if my job changes after taking out self-employed car insurance?
Tell your insurance provider about any changes to the nature of your work. This applies whether you’ve changed occupations completely or you’ve gone back to working for an employer. Your job title and profession are taken into account by insurance providers when they set your premium because some jobs are considered higher risk than others.
Should I take out GAP insurance if I’m self-employed?
There’s no obligation to buy GAP insurance but it could be a useful addition to your self-employed car insurance.
GAP insurance is designed to cover the shortfall between the car’s market value and the outstanding balance on your car finance agreement. When you’re trying to make a success of your business, the last thing you want is to get into more debt, so it’s certainly worth considering.
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