You've Sorted Your Accountancy. Have You Sorted Your Protection?
The Point
New data shows four in ten homeowners have no income protection in place. For PAYE employees that's a gap. For limited company contractors — no sick pay, no employer cover, no safety net of any kind — it's the difference between a difficult few months and losing everything you've built. If you've got your accountancy sorted, the next move is your protection.
What contractors don't have that employees take for granted
PAYE employees get statutory sick pay — currently £116.75 per week for up to 28 weeks. It's not glamorous, but it's something. They often have employer death-in-service benefits, usually 2–4 times salary as a lump sum to their beneficiaries. Larger employers increasingly offer group income protection, where your employer pays for cover that replaces a chunk of your income if you can't work.
Contractors get none of this. No statutory sick pay. Zero death-in-service. No group cover. If you can't work, your income stops. Full stop.
The irony is sharp: contractors typically earn significantly more than the employees they work alongside. A contractor billing £800/day earns 2–3 times what their PAYE equivalent makes. Yet that same contractor has zero employer-provided safety net. The financial risk is inverted.
Why this matters more as you earn more
The gap between what you earn and what you'd receive if you couldn't work widens as your income rises. A contractor billing £500/day has a problem if they can't work. A contractor billing £1,000/day has a crisis.
By the time you're earning contractor-level incomes, your fixed costs have usually scaled too. A mortgage approved on day rate income. Pension contributions running at 10–20% of profits. Business overheads. These don't pause if you get ill or injured.
This isn't about covering basics. This is about protecting a financial position that took years to build. The contractors who've really got their setup right have three things: a good accountant (handling tax-efficient structure), a pension (building retirement), and income protection (protecting against the gap).
The Gold+ contractor — what the full financial stack looks like
Here's the checklist of a truly sorted contractor financial setup:
- Limited company with efficient dividend/salary split — AutoBooks handles this, saving you 15–25% on effective tax
- Pension contributions via the company — tax-deductible, building retirement tax-free. Most contractors miss this opportunity
- Mortgage assessed on day rate — you can borrow more as a contractor than a PAYE peer at the same actual income
- Income protection in place — replacing 50–70% of income if you can't work due to illness or injury
- Life cover commensurate with borrowing — covers your mortgage if something happens to you
Most contractors have 1 and maybe 2 on this list. The gap between "I've got an accountant" and "I've got this all locked down" is where the real financial strength sits. That's the difference between a side-of-desk setup and a truly professional operation.
British Friendly: Why specialist providers matter
Most income protection providers struggle with non-standard income. They're built for salary-based assessment. Variable income, contract-based work, day rates — these fall into the "awkward" category.
British Friendly is one of the few providers that has built a specialist offering around contractor-style income. They understand that a contractor's income pattern is different, that variability doesn't mean instability, and that day rate income is legitimate and assessable.
When you're shopping for protection, working with a broker or adviser who knows the contractor-specific providers is the difference between a smooth process and a frustrating one. The right provider gets it; the wrong one will make you jump through hoops for a policy you shouldn't have needed to fight for.
When to do this — sooner is cheaper
Not a crisis decision. The best time to sort income protection is when you're healthy, earning well, and not under pressure — exactly the position most AutoBooks clients are in.
Premiums are priced on your age, health, and lifestyle. A contractor in good health at 35 pays significantly less than that same person would at 45. A smoker pays more than a non-smoker. Someone with a clean medical history pays less than someone with a chronic condition.
The mathematically cheapest decision is to sort it now, before any health changes. The psychologically easiest decision is the same — you've got the income to afford it, you're not under pressure, and it's just another piece of the financial setup.
Your accountancy should be the start, not the end.
AutoBooks handles tax-efficient company structure. When you're ready to complete the picture — pension, protection, the full stack — we can point you to the right specialists who understand contractor income.
Read our full guide to contractor income protection →