Companies that employ only their owner are set to benefit from the new rules on employers' liability.

From 28 February, companies in which the owner is the sole employee will no longer have to purchase employers' liability compulsory insurance.

The Government announced the measure following a consultation on the issue, which revealed that many small businesses found it difficult to afford the escalating premiums, and that some could not obtain cover at all.

The new rules are expected to benefit around 300,000 firms, saving them an average of £250 a year.

The insurance industry has broadly welcomed the move, although some experts have advised that sole traders could become liable to buy the insurance in certain circumstances, for example if they were to take on temporary staff.

Graeme Trudgill of the British Insurance Brokers' Association (BIBA) described the news as 'a helpful development', but said that sole traders should still seek advice from their insurance broker to ensure that they have all the necessary forms of insurance in place to protect their livelihood.