TL;DR
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr understands that while private medical insurance (PMI) is a fantastic employee benefit in the UK, the tax implications can be confusing. This guide demystifies the P11D form and what it means for your company-provided health cover. What employees and employers need to know about reporting PMI Private medical insurance is one of the most valued employee benefits in the UK.
Key takeaways
- Calculate the BIK Value: The value of the benefit is simply the total cost of the insurance premium you paid for that employee during the tax year (6th April to 5th April). If the policy also covers the employee's family, you must include the entire premium cost, not just the portion attributable to the employee.
- Complete the P11D Form: The value of the private medical or dental insurance is reported in Section I of the P11D form.
- Pay Class 1A National Insurance Contributions (NICs): As the employer, you are liable to pay Class 1A NICs on the total value of the benefit. For the 2024/2025 tax year, the rate is 13.8%. This is an additional cost to your business on top of the premium itself.
- Submit to HMRC and Inform Your Employee: You must submit the completed P11D to HMRC and give a copy to your employee by the deadline.
- Illustrative estimate: The total annual premium for Sarah's policy is £1,200.
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr understands that while private medical insurance (PMI) is a fantastic employee benefit in the UK, the tax implications can be confusing. This guide demystifies the P11D form and what it means for your company-provided health cover.
What employees and employers need to know about reporting PMI
Private medical insurance is one of the most valued employee benefits in the UK. It offers peace of mind and swift access to high-quality medical care, bypassing long NHS waiting lists for certain treatments. In 2023, the number of people covered by private medical insurance in the UK grew by over 8% to 4.56 million, according to data from the Private Healthcare Information Network (PHIN).
However, because HMRC views it as a 'perk' of the job, it's classified as a Benefit in Kind (BIK). This means it has a cash value that is subject to tax, and it must be reported correctly by employers on a P11D form.
Understanding this process is crucial for both employers providing the benefit and employees receiving it. This article breaks down everything you need to know, in plain English.
A Quick Word on What PMI Covers
Before we dive into the tax details, it's vital to be clear on what private medical insurance is for.
Crucial Information: Standard private medical insurance in the UK is designed to cover acute conditions. An acute condition is a disease, illness, or injury that is likely to respond quickly to treatment and lead to a full recovery. It does not cover chronic or pre-existing conditions. A chronic condition is one that is ongoing, has no known cure, or is likely to recur.
Think of it this way: PMI is for new, unexpected health issues that arise after your policy has started, like needing a joint replacement or cataract surgery. It is not for managing long-term conditions like diabetes or asthma.
For Employers: Your P11D Obligations Explained
As an employer offering PMI, you have specific responsibilities to ensure you are compliant with HMRC regulations. Getting this right avoids penalties and ensures your employees aren't faced with unexpected tax bills.
What is a P11D Form?
A P11D is a form you, the employer, must complete and submit to HMRC for each employee who has received benefits in kind that are not accounted for through your payroll. You also need to provide a copy to the employee.
The purpose of the P11D is to report the cash equivalent of these benefits so that the correct amount of tax and National Insurance can be calculated and paid.
Your Key Responsibilities for PMI Reporting
- Calculate the BIK Value: The value of the benefit is simply the total cost of the insurance premium you paid for that employee during the tax year (6th April to 5th April). If the policy also covers the employee's family, you must include the entire premium cost, not just the portion attributable to the employee.
- Complete the P11D Form: The value of the private medical or dental insurance is reported in Section I of the P11D form.
- Pay Class 1A National Insurance Contributions (NICs): As the employer, you are liable to pay Class 1A NICs on the total value of the benefit. For the 2024/2025 tax year, the rate is 13.8%. This is an additional cost to your business on top of the premium itself.
- Submit to HMRC and Inform Your Employee: You must submit the completed P11D to HMRC and give a copy to your employee by the deadline.
Key P11D Deadlines for Employers
Meeting these deadlines is essential to avoid financial penalties from HMRC.
| Task | Deadline |
|---|---|
| End of the tax year | 5th April |
| Submit P11D and P11D(b) forms to HMRC | 6th July |
| Provide a copy of the P11D to your employee | 6th July |
| Pay Class 1A National Insurance Contributions | 22nd July (if paying electronically) |
How to Calculate the BIK and Class 1A NICs: An Example
Let's imagine you provide a PMI policy for your manager, Sarah.
- Illustrative estimate: The total annual premium for Sarah's policy is £1,200.
- The tax year runs from 6th April 2024 to 5th April 2025.
Employer's Calculation:
- BIK Value to Report on P11D (illustrative): £1,200
- Class 1A NICs Payable (illustrative): £1,200 x 13.8% = £165.60
So, the total cost to your business for Sarah's health insurance is the £1,200 premium plus the £165.60 in NICs, totalling £1,365.60. (illustrative estimate)
What if an Employee Joins or Leaves Mid-Year?
You only report the value of the benefit for the period the employee was covered.
- Example (Mid-Year Joiner): If a new employee, David, joins on 6th October and is added to the company PMI scheme, you only report the premium cost from October to the following April. If the annual premium is £1,200 (£100 per month), you would report a BIK of £600 (6 months x £100).
Payrolling Benefits: A Simpler Alternative?
Some employers opt to 'payroll' benefits. This means the BIK value is calculated and added to the employee's monthly pay, and the tax is deducted directly through PAYE.
- Benefits: It spreads the tax cost for the employee over the year, avoids a large adjustment to their tax code, and removes the need for a P11D form for that specific benefit.
- Requirement: You must register with HMRC to do this before the start of the tax year.
Even if you payroll the PMI benefit, you, the employer, are still liable for the Class 1A NICs on the value of the premium.
Navigating the complexities of group PMI schemes, from finding the right cover to understanding the tax implications, can be challenging. An expert broker like WeCovr can help your business compare policies from leading UK providers to find a cost-effective solution that supports your team's health and wellbeing.
For Employees: Understanding PMI on Your P11D
Receiving a P11D from your employer can be confusing, especially if it's your first time. Here’s what it means for you when your private health cover is listed.
Why Am I Being Taxed on My Health Insurance?
HMRC considers company-paid private medical insurance a "perk" or non-cash payment. Essentially, it's treated as extra income. Therefore, you must pay income tax on the value of that benefit, which is the premium your employer pays on your behalf.
You do not pay National Insurance on this benefit – that's your employer's responsibility (the Class 1A NICs we mentioned earlier).
How Will I Pay the Tax?
You don't need to send a cheque to HMRC. The tax is collected automatically in one of two ways:
- Through Your Tax Code: This is the most common method. HMRC will adjust your tax code to account for the value of the medical benefit. Your tax code tells your employer how much tax-free income you get in a year. By reducing your tax-free allowance, you'll pay slightly more tax each month to cover the amount due on the PMI.
- Through a Self-Assessment Tax Return: If you already complete a self-assessment tax return (for example, if you're a high earner or have other sources of income), you'll need to declare the benefit amount from your P11D on the form.
How to Calculate Your Tax Bill: A Worked Example
Let's go back to Sarah, whose employer pays £1,200 for her PMI policy. The amount of tax she pays depends on her income tax band. (illustrative estimate)
Here’s a breakdown based on the 2024/2025 tax rates for England, Wales, and Northern Ireland (Scotland has different bands).
| Income Tax Band | Annual Income | Tax Rate | Annual PMI Premium | Annual Tax Payable on PMI |
|---|---|---|---|---|
| Basic Rate Payer | £12,571 to £50,270 | 20% | £1,200 | £240 (£20 per month) |
| Higher Rate Payer | £50,271 to £125,140 | 40% | £1,200 | £480 (£40 per month) |
| Additional Rate Payer | Over £125,140 | 45% | £1,200 | £540 (£45 per month) |
As you can see, for a basic rate taxpayer, the "cost" of receiving a £1,200 health insurance policy is £20 per month in tax. For many, this is a small price to pay for the significant benefits and peace of mind that private medical insurance UK provides. (illustrative estimate)
What if My Family is on the Policy?
This is a very common question. If your employer's PMI scheme covers your partner and/or children, the entire premium paid by the employer is considered a benefit in kind to you, the employee.
- Example: Your personal cover costs £800 per year, and adding your family costs an additional £1,000. Your employer pays the full £1,800. The BIK value reported on your P11D will be £1,800, and you will pay income tax on that full amount.
What if I Contribute to the Cost?
If you pay your employer for some or all of the cost of the PMI premium (often deducted from your net pay), this amount can be deducted from the BIK value.
- Example: The total premium is £1,800. You contribute £600 over the year through salary deductions.
- Illustrative estimate: Total premium: £1,800
- Illustrative estimate: Your contribution: -£600
- BIK Value for P11D (illustrative): £1,200
You would then only pay tax on the remaining £1,200. Ensure your employer has a clear record of your contributions to report this correctly. (illustrative estimate)
The Value of PMI Beyond the Tax
While no one enjoys paying more tax, it's important to weigh it against the substantial value of a private health cover plan.
- Fast-Tracked Treatment: NHS waiting lists for consultant-led elective care in England reached 7.54 million in early 2024, according to NHS England data. PMI provides a route to quicker diagnosis and treatment for eligible acute conditions.
- Choice and Comfort: PMI often gives you more choice over your specialist and hospital. Treatment is usually in a private room with amenities like an en-suite bathroom and more flexible visiting hours.
- Access to Advanced Treatments: Some policies provide access to new drugs or treatments not yet available on the NHS due to cost or other restrictions.
- Enhanced Wellbeing Support: Modern PMI isn't just for when you're ill. Most of the best PMI providers include a suite of wellbeing services, such as:
- 24/7 remote GP access
- Mental health support lines and therapy sessions
- Discounts on gym memberships and health screenings
- Nutrition and lifestyle advice
At WeCovr, we ensure our clients get the most out of their policies. That's why customers who purchase PMI or Life Insurance with us also receive complimentary access to CalorieHero, our AI-powered calorie and nutrition tracking app, to support their daily health goals.
Special Cases and Nuances in PMI Reporting
The world of tax isn't always straightforward. Here are a few other scenarios you might encounter.
Health Insurance Trusts
Some larger companies operate their PMI scheme through a trust. In this setup, the company puts money into a trust, which is then used to pay for employees' medical claims.
From a P11D perspective, the rules are largely the same. The "premium equivalent" or contribution made by the employer to the trust on behalf of the employee is treated as the BIK. Reporting this can sometimes be more complex, and it's a key reason for employers to work with an experienced PMI broker.
Cash Allowances Instead of PMI
Some companies offer employees a monthly cash allowance to purchase their own health insurance.
- How it's taxed: This cash payment is simply treated as normal salary. It is added to your gross pay and is subject to both Income Tax and National Insurance (for both employee and employer) through the standard PAYE payroll process. It does not get reported on a P11D form.
Other Taxable Health Benefits
It's not just PMI that counts as a BIK. Other health-related benefits provided by your employer are also often taxable and reportable on a P11D.
| Benefit Type | Taxable? | Notes |
|---|---|---|
| Private Medical Insurance | Yes | The main topic of this guide. |
| Private Dental Insurance | Yes | Treated in the same way as PMI. |
| Health Screenings | Usually No | One health screening or medical check-up per employee per year is exempt. |
| Eye Tests for VDU Users | No | If required for work with display screen equipment, these are exempt. |
| Employee Assistance Programmes (EAPs) | Usually No | Generally considered a non-taxable welfare benefit. |
| Gym Membership | Yes | If the employer pays for a membership at an external gym. |
Taking Control of Your Health and Finances
Understanding the P11D process empowers you to manage your finances effectively and appreciate the true value of your employee benefits package.
For employers, offering a competitive benefits package is key to attracting and retaining talent. For employees, it’s a safety net that protects your health and wellbeing.
If you are an employer looking to set up a new group scheme, or an individual wanting to understand your options, a qualified PMI broker is your best resource. WeCovr's expert advisors offer no-obligation advice and can compare the market for you, ensuring you find the right cover at the right price. Plus, our clients benefit from discounts on other types of cover, like life or income protection insurance, when they take out a policy with us. Our high ratings on independent customer review websites reflect our commitment to exceptional service.
Do I have to declare my company health insurance to HMRC myself?
What happens if my employer forgets to submit a P11D for my PMI?
Is there any way to get company health insurance without it being a taxable benefit?
Ready to explore your private medical insurance options? Whether you're an individual or a business, our friendly team at WeCovr can provide a free, no-obligation quote and help you navigate the market with confidence. Get your personalised quote today!
Sources
- Office for National Statistics (ONS): Mortality, earnings, and household statistics.
- Financial Conduct Authority (FCA): Insurance and consumer protection guidance.
- Association of British Insurers (ABI): Life insurance and protection market publications.
- HMRC: Tax treatment guidance for relevant protection and benefits products.
