Private Health Insurance Tax Relief for UK Employers
As an FCA-authorised expert with over 800,000 policies of various kinds issued, WeCovr provides this guide to help UK businesses understand private medical insurance tax relief. Offering private health cover is a powerful way to support your team, and understanding the tax implications is key to maximising its value.
How companies can offset PMI costs and save through business schemes
Providing private medical insurance (PMI) is one of the most highly valued employee benefits a UK company can offer. It sends a clear message that you care about your team's health and wellbeing. But did you know it also comes with significant financial advantages for the business?
By offering a group health insurance scheme, your company can claim the cost of the policy premiums as a legitimate business expense. This means you can offset the entire cost against your Corporation Tax bill, effectively reducing the net cost of the cover. It’s a strategic investment that not only enhances your employee value proposition but also delivers a direct, tangible saving for your business.
What is Business Private Medical Insurance?
Business private health insurance, also known as a group or company scheme, is a policy taken out by an employer to provide healthcare cover for its employees. Instead of individuals arranging their own cover, the company manages a single policy for the whole group.
These schemes are designed to give employees and, often, their families quicker access to diagnosis and treatment for acute medical conditions. In a time of record NHS waiting lists, this benefit is more valuable than ever.
Key benefits for employers offering PMI:
- Reduced Sickness Absence: Faster access to treatment means employees can return to work sooner. According to the ONS, an estimated 185.6 million working days were lost because of sickness or injury in 2022, the highest on record. PMI can directly combat this.
- Increased Productivity: A healthier, happier workforce is a more productive one. Knowing they have support when they need it reduces stress and improves focus.
- Talent Attraction and Retention: In a competitive job market, a strong benefits package is crucial. PMI is a premium benefit that can set you apart from other employers.
- Improved Employee Morale: Offering health insurance demonstrates a genuine commitment to employee welfare, fostering loyalty and a positive company culture.
The Employer's Perspective: Claiming Corporation Tax Relief
Here is the most significant financial incentive for businesses: the premiums you pay for your company's private medical insurance scheme are considered an allowable business expense by HMRC.
This means you can deduct the full cost of the premiums from your company's profits before calculating your Corporation Tax liability.
How does this work in practice?
- Your company pays the annual or monthly premiums for the group health insurance policy.
- This total premium cost is recorded as a business expense in your company accounts.
- When you calculate your pre-tax profit for the year, this expense is deducted.
- Your Corporation Tax is then calculated on this lower profit figure.
The main rate of Corporation Tax in the UK is currently 25% (as of the 2025/26 tax year). Therefore, for every £1,000 you spend on PMI premiums, you can save £250 on your tax bill.
| Item | Amount |
|---|---|
| Annual PMI Premium Cost | £10,000 |
| Corporation Tax Rate | 25% |
| Tax Relief (Saving) | £2,500 |
| Net Cost of Policy to Business | £7,500 |
This tax relief makes providing health insurance significantly more affordable than the headline premium price might suggest. It turns the expense into a highly efficient investment in your team.
The Employee's Perspective: Understanding Benefit in Kind (BIK) Tax
While the company gets tax relief, the provision of private medical insurance is considered a 'perk' or a Benefit in Kind (BIK) for the employee. This means it has a taxable value that the employee must pay tax on.
The company is responsible for reporting this benefit to HMRC for each employee covered by the scheme. This is done using a P11D form at the end of each tax year.
How is the BIK tax calculated for an employee?
- The 'cash equivalent' of the benefit is the cost of the premium for that specific employee.
- This amount is added to the employee's total earnings for the tax year.
- The employee then pays income tax on this amount at their marginal rate (e.g., 20% for a basic rate taxpayer, 40% for a higher rate taxpayer, or 45% for an additional rate taxpayer).
Example: A Basic Rate Taxpayer
- Cost of PMI premium per employee: £800 per year.
- Employee's tax rate: 20% (Basic Rate).
- BIK tax payable by employee: £800 x 20% = £160 per year (or £13.33 per month).
For a cost of just over £13 a month, the employee gains access to a private medical insurance policy that could cost them £40-£60 a month if they bought it individually.
In addition to the employee's income tax, the employer must also pay Class 1A National Insurance Contributions (NICs) on the value of the benefit. The Class 1A NICs rate is currently 13.8%.
Employer's NICs Calculation:
- Cost of PMI premium per employee: £800 per year.
- Class 1A NICs rate: 13.8%.
- NICs payable by employer: £800 x 13.8% = £110.40 per year.
A Worked Example: The Total Cost for a Small Business
Let's imagine a small design agency, "Creative Spark Ltd," with 5 employees. The company wants to offer a mid-range private health cover policy. An expert broker like WeCovr helps them compare the market and find a policy that costs £700 per employee per year.
Total Annual Premium: 5 employees x £700 = £3,500
Here's how the tax implications break down for the business:
| Financial Element | Calculation | Amount |
|---|---|---|
| Gross Policy Cost | 5 employees x £700 | £3,500 |
| Corporation Tax Relief | £3,500 x 25% | - £875 |
| Employer's Class 1A NICs | £3,500 x 13.8% | + £483 |
| Total Net Cost to Business | £3,500 - £875 + £483 | £3,108 |
Net Cost Per Employee: £3,108 / 5 = £621.60 per year
For the business, the effective annual cost per employee is £621.60, not the initial £700. For this investment, they get a healthier, more secure workforce, likely leading to reduced absenteeism and higher retention.
For an employee on a basic 20% tax rate, the annual cost is just £140 (£700 x 20%), providing them with peace of mind and fast access to medical care worth many times that amount.
Is Business Health Insurance Still Worth It? The Benefits Outweigh the Tax
Absolutely. While there is a tax liability for the employee and an NIC cost for the employer, the return on investment is immense.
- Tackling NHS Waiting Times: In mid-2024, the NHS England waiting list for consultant-led elective care stood at over 7.5 million. PMI allows your employees to bypass these queues for eligible conditions, getting them diagnosed and treated faster.
- Reducing Absenteeism Costs: The CIPD's 2023 Health and Wellbeing at Work report found the average level of employee absence was 7.8 days per employee per year, the highest in over a decade. The direct cost of this to businesses is substantial, not to mention the indirect costs of lost productivity and pressure on other team members. PMI is a direct tool to manage and reduce these costs.
- Boosting Mental Health Support: Most modern PMI policies include extensive mental health support, from therapy sessions to 24/7 helplines. With stress and mental ill-health being leading causes of absence, this is an invaluable resource for both employees and employers.
- A Competitive Edge in Recruitment: Offering private health cover makes your benefits package stand out. It signals that you are a caring, forward-thinking employer, helping you attract and secure the best talent.
Critical: What Business PMI Doesn't Cover
It is vital for both employers and employees to understand the limitations of private medical insurance in the UK. Standard policies are designed for a specific purpose and do not cover everything.
The Golden Rule: UK PMI is designed to treat acute conditions that arise after you take out the policy.
- Acute Condition: A disease, illness, or injury that is likely to respond quickly to treatment and lead to a full recovery (e.g., joint replacements, cataract surgery, hernia repair, cancer treatment).
- Chronic Condition: A disease, illness, or injury that has one or more of the following characteristics: it needs ongoing or long-term monitoring, it has no known 'cure', it requires palliative care, or it is likely to recur (e.g., diabetes, asthma, high blood pressure, arthritis).
Key Exclusions on Standard UK PMI Policies:
- Pre-existing Conditions: Any medical condition you had symptoms of, or received advice or treatment for, in the years before your policy began (typically the last 5 years).
- Chronic Conditions: As defined above, the long-term management of chronic illnesses is not covered. PMI may cover an acute 'flare-up' of a chronic condition, but not the day-to-day management.
- Emergency Services: A&E visits and emergency treatment remain the domain of the NHS.
- Normal Pregnancy & Childbirth: Uncomplicated pregnancies are not covered, though some policies offer cover for specific complications.
- Cosmetic Surgery: Procedures that are not medically necessary.
- Drug and Alcohol Abuse: Treatment for addiction is often excluded or available under specialist cover options.
Understanding these exclusions is crucial to managing expectations and ensuring the policy is used correctly.
How to Choose the Right Business PMI Scheme
Navigating the private medical insurance UK market can be complex. Working with an expert broker like WeCovr is invaluable, as we can help you tailor a policy to your company's specific needs and budget at no extra cost to you.
Here are the key factors to consider:
-
Type of Underwriting:
- Moratorium (Most Common for SMEs): A quick and easy way to set up a policy. The insurer doesn't ask for medical history upfront but will exclude treatment for any condition that existed in the 5 years before the policy start date. This exclusion can be lifted if the member goes 2 continuous years on the policy without symptoms, advice, or treatment for that condition.
- Full Medical Underwriting (FMU): Employees complete a full health questionnaire. The insurer assesses this and lists specific exclusions on the policy from day one. It's more admin-heavy but provides absolute clarity on what is and isn't covered.
- Medical History Disregarded (MHD): Usually only available for larger corporate schemes (e.g., 20+ employees). This is the most comprehensive option, as it agrees to cover eligible pre-existing conditions. It is also the most expensive.
-
Level of Cover:
- In-patient and Day-patient Cover: This is the core of any policy, covering treatment where you need a hospital bed.
- Out-patient Cover: This is for consultations, diagnostic tests, and scans that don't require a hospital bed. You can choose a comprehensive level or cap it at a certain monetary value (e.g., £1,000) to manage costs.
- Therapies: Cover for physiotherapy, osteopathy, etc.
-
The 'Six-Week' Option: A popular cost-saving measure. The policy will only pay for treatment if the NHS waiting list for that treatment is longer than six weeks. If the NHS can treat you within six weeks, you use the NHS. This can significantly reduce premiums.
-
Hospital List: Insurers offer different tiers of hospitals. A national list is standard, but adding central London private hospitals will increase the premium.
-
Excess: This is the amount an employee must pay towards a claim in a policy year. A higher excess (e.g., £250 or £500) will lower the overall premium.
The Added Value of Modern PMI Schemes
Today's best PMI providers offer more than just treatment. They are evolving into holistic health and wellness partners.
- Digital GP Services: 24/7 access to a GP via phone or video call, often with the ability to get prescriptions sent directly to a local pharmacy.
- Wellness Programmes: Many policies now include discounts on gym memberships, fitness trackers, and health screenings.
- Mental Health Support: Access to counselling, therapy sessions, and self-help resources through dedicated apps and phone lines.
- Expert Support Services: Second medical opinion services and dedicated cancer care nurses are common features.
At WeCovr, we champion this holistic approach. That's why clients who purchase PMI or Life Insurance through us also receive complimentary access to CalorieHero, our AI-powered calorie and nutrition tracking app, helping your team build healthy habits day-to-day. Furthermore, our clients often benefit from discounts on other types of insurance, providing even greater value.
Reporting to HMRC: A Guide for Employers
As an employer providing PMI, you have a legal duty to report it to HMRC.
- Complete a P11D Form: For each employee who receives the health insurance benefit, you must complete a P11D form. This form details the cash equivalent of the benefit (i.e., the premium paid for them).
- Complete a P11D(b) Form: This is a summary form where you, the employer, declare the total value of all benefits provided across the company. You use this to calculate and pay the Class 1A National Insurance you owe.
- Submission Deadline: The deadline for submitting these forms to HMRC is 6th July following the end of the tax year.
- Payment Deadline: The deadline for paying the Class 1A NICs is 22nd July (or 19th July if paying by cheque).
Alternatively, many employers now choose to 'payroll the benefits'. This means the BIK is processed through your monthly payroll. The employee's tax is collected in real-time each month, and a P11D is not required. You must register with HMRC to do this before the start of the tax year.
Is private health insurance tax deductible for the self-employed in the UK?
Does the company have to pay for an employee's family members on the policy?
What happens if an employee leaves the company?
Take the Next Step with WeCovr
Understanding the nuances of business health insurance and its tax implications is the first step. The next is finding the perfect policy that balances comprehensive cover with your company's budget.
As an independent, FCA-authorised PMI broker with high customer satisfaction ratings, WeCovr is perfectly placed to help. We do the hard work for you, comparing policies from all the UK's leading insurers to find a solution that fits your team and your bottom line. Our expert advice is free, and there is no obligation.
Invest in your team's health and your company's future. Get a free, no-obligation quote for your business today.
Why private medical insurance and how does it work?
What is Private Medical Insurance?
Private medical insurance (PMI) is a type of health insurance that provides access to private healthcare services in the UK. It covers the cost of private medical treatment, allowing you to bypass NHS waiting lists and receive faster, more convenient care.How does it work?
Private medical insurance works by paying for your private healthcare costs. When you need treatment, you can choose to go private and your insurance will cover the costs, subject to your policy terms and conditions. This can include:• Private consultations with specialists
• Private hospital treatment and surgery
• Diagnostic tests and scans
• Physiotherapy and rehabilitation
• Mental health treatment
Your premium depends on factors like your age, health, occupation, and the level of cover you choose. Most policies offer different levels of cover, from basic to comprehensive, allowing you to tailor the policy to your needs and budget.
Questions to ask yourself regarding private medical insurance
Just ask yourself:👉 Are you concerned about NHS waiting times for treatment?
👉 Would you prefer to choose your own consultant and hospital?
👉 Do you want faster access to diagnostic tests and scans?
👉 Would you like private hospital accommodation and better food?
👉 Do you want to avoid the stress of NHS waiting lists?
Many people don't realise that private medical insurance is more affordable than they think, especially when you consider the value of faster treatment and better facilities. A great insurance policy can provide peace of mind and ensure you receive the care you need when you need it.
Benefits offered by private medical insurance
Private medical insurance provides numerous benefits that can significantly improve your healthcare experience and outcomes:Faster Access to Treatment
One of the biggest advantages is avoiding NHS waiting lists. While the NHS provides excellent care, waiting times can be lengthy. With private medical insurance, you can often receive treatment within days or weeks rather than months.
Choice of Consultant and Hospital
You can choose your preferred consultant and hospital, giving you more control over your healthcare journey. This is particularly important for complex treatments where you want a specific specialist.
Better Facilities and Accommodation
Private hospitals typically offer superior facilities, including private rooms, better food, and more comfortable surroundings. This can make your recovery more pleasant and potentially faster.
Advanced Treatments
Private medical insurance often covers treatments and medications not available on the NHS, giving you access to the latest medical advances and technologies.
Mental Health Support
Many policies include comprehensive mental health coverage, providing faster access to therapy and psychiatric care when needed.
Tax Benefits for Business Owners
If you're self-employed or a business owner, private medical insurance premiums can be tax-deductible, making it a cost-effective way to protect your health and your business.
Peace of Mind
Knowing you have access to private healthcare when you need it provides invaluable peace of mind, especially for those with ongoing health conditions or concerns about NHS capacity.
Private medical insurance is particularly valuable for those who want to take control of their healthcare journey and ensure they receive the best possible treatment when they need it most.
Important Fact!
We can look at a more suitable option mid-term!
Why is it important to get private medical insurance early?
👉 Many people are very thankful that they had their private medical insurance cover in place before running into some serious health issues. Private medical insurance is as important as life insurance for protecting your family's finances.👉 We insure our cars, houses, and even our phones! Yet our health is the most precious thing we have.
Easily one of the most important insurance purchases an individual or family can make in their lifetime, the decision to buy private medical insurance can be made much simpler with the help of FCA-authorised advisers. They are the specialists who do the searching and analysis helping people choose between various types of private medical insurance policies available in the market, including different levels of cover and policy types most suitable to the client's individual circumstances.
It certainly won't do any harm if you speak with one of our experienced insurance experts who are passionate about advising people on financial matters related to private medical insurance and are keen to provide you with a free consultation.
You can discuss with them in detail what affordable private medical insurance plan for the necessary peace of mind they would recommend! WeCovr works with some of the best advisers in the market.
By tapping the button below, you can book a free call with them in less than 30 seconds right now:
Our Group Is Proud To Have Issued 800,000+ Policies!
We've established collaboration agreements with leading insurance groups to create tailored coverage
How It Works
1. Complete a brief form
2. Our experts analyse your information and find you best quotes
3. Enjoy your protection!
Any questions?
Learn more
Who Are WeCovr?
WeCovr is an insurance specialist for people valuing their peace of mind and a great service.👍 WeCovr will help you get your private medical insurance, life insurance, critical illness insurance and others in no time thanks to our wonderful super-friendly experts ready to assist you every step of the way.
Just a quick and simple form and an easy conversation with one of our experts and your valuable insurance policy is in place for that needed peace of mind!