Is tax investigation insurance worth it for the self-employed?
Tax investigation insurance pays your accountant's professional fees if HMRC opens an enquiry into your tax return. It does not pay any tax, interest or penalties found to be due. For self-employed people it typically costs from about £75 a year, with cover for professional fees up to tens of thousands of pounds. It's most worthwhile if your accounts involve judgement calls (mixed-use expenses, home-office claims, cash income) or if a full enquiry's fees would strain your finances. See what insurance does a sole trader need.
- Covers professional fees for handling an HMRC enquiry, not the tax, interest or penalties themselves.
- Advertised self-employed cover starts from about £75 a year (Markel, 2026), and many accountants offer fee-protection schemes.
- Policies usually require returns filed on time and exclude deliberate errors or fraud.
- HMRC can generally open an enquiry within 12 months of an on-time return, and can go back further for careless or deliberate errors.
- Premiums are generally an allowable business expense.
What It Covers and What It Doesn't
Usually excluded: the tax, interest and penalties themselves; enquiries arising from late or missing returns; deliberate errors or fraud; and investigations started before the policy began.
If an enquiry finds you underpaid £2,000, the policy doesn't pay the £2,000. It pays the professional who argues your case and keeps the bill for their time from landing on you.
Who Benefits Most
Buying It: Standalone or Through Your Accountant
Illustrative Case: The Random Enquiry
Scenario: A self-employed photographer receives an HMRC enquiry letter about her home-office and vehicle claims. Her accountant estimates 20 hours of work to respond, attend meetings and negotiate.
Resolution & Judicial Outcome: Her £95-a-year fee-protection policy pays the accountant's fees. HMRC adjusts one vehicle apportionment, resulting in £340 of extra tax plus interest, which she pays herself. Without cover, the professional fees would have been several times the tax adjustment.
What You Should Do: Step-by-Step Action Plan
Critical Mistakes to Avoid
- Expecting the policy to pay tax or penalties.
- Buying cover after an enquiry letter has arrived.
- Filing late and losing cover.
- Not keeping evidence for home and vehicle apportionments.