Professional indemnity insurance — is it fully tax deductible for a small consultancy?

Good news — yes, professional indemnity insurance taken out to cover your consultancy work is fully deductible as a business expense. Because it is required by your client contracts and protects the trade itself, it clearly meets the 'wholly and exclusively for the purposes of the trade' test, so the full £900 reduces your company's taxable profits for the year in which it is paid. Make sure the premium is paid by the company and claimed as an expense in the accounts — and if any personal cover is bundled into the same policy, apportion that element out, as it would not be deductible. On VAT, most UK insurance premiums are exempt from VAT, so you typically can't reclaim anything on your VAT return (insurance premium tax may apply instead, but that isn't recoverable either). Finally, keep the policy documents and renewal invoices filed with your records, as they are the evidence HMRC would expect to see if it ever queried the deduction.