Corporate Health Insurance
Health Insurance for directors can offer faster treatment than the NHS – essential to get you back on your feet and running your business again quickly.
It allows you to skip NHS waiting lists and get treated sooner, in top-notch facilities by private medical practitioners.
Corporate Health Insurance can be paid for by your limited company if you want to run it through the business.
How Does Director Health Insurance Work?
To access your Private Health Insurance, you’ll start with a referral from your GP. From there, medical care is split into two: inpatient treatment and outpatient treatment.
Inpatient care is defined as all care that requires the use of a hospital bed overnight. This is usually related to surgical procedures.
Outpatient care is defined as all care that doesn’t need a hospital bed. This usually refers to treatment such as diagnostic tests and scans, although other procedures can also be performed on an outpatient basis.
All Health Insurance for directors will cover inpatient care as standard. You have the option to add outpatient care – either covered in full or limited to a set monetary value each year – to a policy for comprehensive cover at an additional cost.
You’ll usually need some element of outpatient care – e.g. a scan – before being admitted for inpatient care. Not having outpatient cover means you’d need to wait for this on the NHS, so having outpatient cover can prove valuable.
How is Corporate Health Insurance Taxed?
Although some insurers will allow you to pay for a personal Health Insurance plan with a business bank account there are tax implications.
Keep in mind that Private Medical Insurance is considered a P11D Benefit in Kind when a business pays for a policy on behalf of an employee. This means there’s additional income tax to pay on the premiums being paid on your behalf.
However, there can be some tax-efficiencies by having the business pay for it.
Paying for Health Insurance Personally
Paying for cover personally requires you to generate more from the company in gross income than the premium because your net income (out of which you’ll be paying premiums0 is reduced by the appropriate taxes from the gross level.
For example, to meet a cost of a £1,200-a-year Health Insurance policy from dividend income taxed at the higher rate (32.5%), you’d need to receive dividends of £1,778.
Then, because dividends are paid net of corporation tax, you’d need to earn £2,195 within the company to pay your Private Health Insurance premiums personally.
Paying for Health Insurance Through Your Own Limited Company
As mentioned, Health Insurance paid for through a company is a P11D benefit in kind.
To reclaim the additional tax, HMRC requires employers either to take the owed tax from their employees through their payroll, or declare these expenses at the end of the tax year in order for them to be valued and taxed.
As the business owner, you will also need to pay National Insurance contributions on the premiums, but your business will benefit from corporation tax relief.
So to use a £1,200 premium as an example again, you’d have to pay National Insurance contributions of £166 for a total cost of £1,366, less corporation tax relief of £260.
As an individual, you’d be taxed personally at 40% as a higher-rate taxpayer on the value of the benefit (£1,200) for a total tax bill on your Private Health Insurance of £480.
This would have to be met from dividend income using the same principles as above, requiring you to earn £878 within the company to meet the cost, providing a total bill to the company for your Private Health Insurance of £1,984, marginally less than paying for it personally.
IMPORTANT NOTICE 🧐
These calculations are for guidance only. They are not tax advice. Tax legislation varies depending on your personal circumstances and is subject to change.