Is Group Income Protection a Taxable Benefit in Kind?

My employer is thinking of introducing a Group Income Protection policy to provide sick pay insurance in case we can’t work. I was just wondering if Group Income Protection was taxable and might be taken out of my wages, as I’m not sure I want that.

Question asked by G Ahmed
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Answered by Michael Englefield

Some types of Group Insurance policies are taxable. Business Private Medical Insurance is an example of this.

These types of policy are known as taxable benefits in kind, or P11d benefits. You pay tax on these as an individual, even though your company is paying for the premiums.

The way P11d benefits work is that HMRC adjusts your tax code to reduce your personal allowance in line with the cost of the premium, so you pay tax on a little more of your income.

Is Group Income Protection a P11d?

Is Group Income Protection Cover a P11d Benefit?

However, Group Income Protection is not a taxable benefit in kind in most instances.

That means that you as the employee shouldn’t have to pay any additional tax for having your company pay for Income Protection on your behalf.

You’ll have to pay tax on Group Income Protection payouts just as you do on your salary – but this is all handled by your employer and the PAYE system.

In the event of you claiming, the insurer will pay a sum equivalent to your wages to your employer, and your employer will distribute this to you via PAYE. As a result, it will be taxed as if you’d earned the income.

Group Income Protection
 
Business Income Protection
 
P11d benefit in kind
 
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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