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Aipedia: Tax advisers
Under the PCRT AI guidance, putting client data into a public AI tool without the client's consent is likely to breach confidentiality. Tax files hold some of the most sensitive financial data a client has.
Part of: AI in Tax advisers
In short
Paragraph 4.2 of the PCRT topical guidance on AI says inputting client data into public AI tools "is likely to constitute a breach of client confidentiality" without client consent. The guidance recommends anonymisation (4.4), warns that control of data is lost and that it may be retained or stored overseas (4.5), and asks firms to build data handling into policy with reference to the ICO (4.6). Its scenarios compare free public tools with internal ones and cover third-party NDA data and clients who refuse AI. A confidentiality breach may lead to a client claim under PI, a data incident under cyber cover, or both.
The confidentiality section of the PCRT AI guidance (paras 4.1 to 4.6) is the most direct part of the document:
The scenarios add detail: a free public tool versus an internal tool, client data in a public tool, third-party data held under a non-disclosure agreement, and a client who asks that AI not be used.
A tax file can include income, investments, family arrangements, health-related reliefs, residence history and business plans. It often includes information about third parties, such as a spouse, business partners or beneficiaries. Pasting a set of accounts, an HMRC letter or a trust deed into a free chatbot to "get a quick summary" may send all of that outside the firm's control. Anonymising properly takes more than deleting a name: combinations of figures, dates and places can identify a client.
Beyond professional confidentiality, UK GDPR applies. Since 5 February 2026, articles 22A to 22D, inserted by section 80 of the Data (Use and Access) Act 2025, set safeguards for significant decisions made solely by automated means. Most tax work involves human review, but a firm that lets a tool make decisions about clients without human involvement should consider whether those safeguards apply.
Illustrative scenario: a trainee pastes a client's full share sale documents into a free AI tool to draft a summary for the partner. The documents include information about the buyer that the client received under an NDA. The client later learns how the summary was produced and complains. The buyer says its confidential information was disclosed and threatens a claim against the client, who in turn looks to the firm.
Other cases: a staff member uses a personal AI account for work, a notetaker stores recordings with an overseas provider, or a client who refused AI finds it was used anyway. See AI meeting transcription.
A client's claim that the firm breached confidentiality and caused loss is usually a civil liability claim, and the CIOT/ATT PII Regulations require cover for all civil liability from tax services (4.1(b)). Some PI wordings may also include some cover for breach of confidence and data protection claims, subject to the terms. Costs of responding to a data incident, such as investigation, notification and ICO handling, are more commonly cyber insurance matters. Regulatory fines are commonly excluded or limited. Check how your PI and cyber policies interact. See cyber insurance and AI risks, data breach cover within PI and ICO fines and PI.
See the PCRT AI guidance explained, AI-drafted HMRC enquiry letters and the AI in tax advice hub.
Apex arranges PI for tax advisers. A broker can map where a confidentiality breach involving AI would fall between the two policies.
Only if the data is truly anonymised. PCRT AI para 4.4 recommends anonymisation, but figures, dates and places can still identify a client. If identification is possible, treat it as client data and get consent or use an approved internal tool.
The PCRT guidance includes a scenario comparing a free public tool with an internal tool. Para 4.2 targets public tools. An internal or enterprise tool with suitable data terms reduces the risk, but firms should still check retention, training use and where data is stored.
A client claim for loss caused by a breach of confidence is usually a civil liability claim, which CIOT/ATT minimum terms require PI to cover. Incident response costs and regulatory matters are more often cyber insurance issues. The wording of each policy decides.
The PCRT AI guidance includes this as a scenario. Respect the request or discuss alternatives, and record it so that staff do not use AI on that client's work by mistake.
Tell us about your firm and the work you do. A broker will review how your current PI treats AI-assisted work, or arrange new cover. No fee for a quote. Or call 0117 325 0027.
Start a PI quote Request a callbackApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.
