Can My Limited Company Pay For My Private Health Insurance?

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30-01-2021

Health Insurance pays for you to have private medical treatment, avoiding lengthy waiting times on the NHS. You therefore get treatment exactly when you need it the most.

If you’re thinking about buying Health Insurance through your own limited company, it’s likely you’re some kind of contractor or a company director.

Many of our clients working in this capacity are particularly interested in Private Health Insurance. They’re looking to speed up access to healthcare compared to the NHS. This allows them to get treatment for eligible conditions faster and be back at work earning again sooner.

With most contractors and directors lacking sick pay, this is vitally important.

Can You Pay for Health Insurance Through Your Company?

Yes, it’s possible to buy your own personal Health Insurance via your limited company.

One way to do this would be to set up Business Health Insurance for yourself and your staff. Providing you have enough workers, this offers Medical Insurance to a group of employees under a single policy.

However, not every business has enough workers for a group scheme. Alternatively, you may not be looking to extend the benefit beyond yourself just yet. In such cases, it’s also possible to arrange individual Health Insurance and have your company pay.

Here, the company covers your premiums, which are usually an allowable business expense against your corporation tax bill.

There are other tax implications when you use your company to pay for your Health Insurance, however. HMRC considers it a P11D benefit in kind, so there’s additional income tax due for you as an individual on premiums.

How Much Does Private Medical Insurance Cost?

An insurer calculates your Health Insurance premiums by firstly examining a range of personal factors, such as your:

  • Age
  • Smoker status
  • Current health and medical history
  • Location.

On top of these factors, there are a range of policy options for you to consider. These will determine the coverage of your plan, making it more or less comprehensive and therefore impacting the price. These include:

  • Adding outpatient cover
    All policies cover inpatient treatment as standard. This is all care where you require a hospital bed, such as after surgery. Outpatient treatment refers to all care not requiring a hospital bed, for example diagnostic tests and scans. This is an optional extra for an additional premium.
  • Your hospital list
    Every insurer has a list of private facilities you’re eligible to have treatment in. Some have multiple tiers of facilities, with an option to access more prestigious hospitals, such as those in Central London, for an additional premium.
  • Setting an excess 
    Your excess is how much you’re willing to pay upfront towards your private healthcare before your policy kicks in to cover the rest.
  • Policy additions
    There are a range of extras you can add to your policy to make it more comprehensive. This includes dental and optical care, which covers the cost of routine dental and optical treatment, such as checkups, fillings and eyewear.

Example Premiums

To calculate the average cost of Health Insurance in the table below, we’ve compared quotes from every single major UK provider. In order to do so, we’ve assumed that each individual is:

  • In good health
  • A non-smoker
  • Looking for a comprehensive policy will full outpatient cover
  • Willing to pay a £250 excess
  • Not looking for any additional extras on their policy
  • Based in the same postcode as our Brighton office.

30 Year Old

40 Year Old

50 Year Old

£57.64
per month

£73.08
per month

£97.50
per month

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How Is Health Insurance Taxed When Bought Through Your Limited Company?

When you buy Health Insurance as an individual, you don’t have to worry about tax on the premiums themselves because you pay for the cover from post-tax income.

However, don’t forget that you’ll first have to generate the income you use to pay premiums within your limited company. Once you pay yourself this income from the business, HMRC taxes it accordingly.

For a contractor or director paying themselves dividends and taxed at the higher rate (32.5%), to pay for a £1,200-a-year Health Insurance policy you’d therefore need to receive a gross dividend payment of £1,778.

Then, because the company pays you dividends net of corporation tax, you’d need to earn £2,195 within the company to pay yourself the income you use to buy Private Health Insurance personally.

Using Your Limited Company

The alternative is to pay your Health Insurance premiums via your business.

When you go down this route, any Health Insurance policy the business buys for you counts as a P11D / benefit in kind. You’d therefore need to declare this on a P11D form and pay additional tax.

This is because when your company pays for your Health Insurance, it does so with pre-tax earnings. The business provides the policy in addition to your remuneration, so HMRC effectively sees this as your pay having gone up without you paying any additional PAYE tax.

As the business owner, you also have to pay employer’s national insurance contributions on premiums. However, your business will benefit from corporation tax relief.

To use a £1,200 annual premium as an example again, you’d have to pay employer’s national insurance contributions of £166 for a total cost of £1,366, less corporation tax relief of £260.

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. This results in 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 purposes only. They are not tax advice. Tax legislation varies depending on your personal circumstances and is subject to change. We always recommend discussing buying Health Insurance through your limited company with your accountant first.

Expert Private Medical Insurance Advice

With many optional extras and a host of different providers and policies on the market, finding the right Health Insurance can be hard enough as it is. That’s without even factoring in whether you should pay for it personally or buy cover through your limited company.

At Drewberry we do all of the hard work for you. Our experts are on hand to find the best Private Health Insurance for your needs, including tailoring the policy to suit you. We’re also here to discuss the pros and cons of running your Health Insurance through your limited company.

Why Speak to Us…

We started Drewberry™ because we were tired of being treated like a number.

We all deserve a first class service when it comes to issues as important as protecting our health. Below are just a few reasons why it makes sense to talk to us.

  • There is no fee for our service
  • We are an award winning 🏆 independent insurance broker who works with all the leading UK insurers
  • You’ll speak to a dedicated expert from start to finish
  • We are very proud of the 3083 and growing independent client reviews rating us at 4.92 / 5
  • Claims support when you need it most.
  • We are authorised and regulated by the Financial Conduct Authority. You can find us on the financial services register here 🧐
  • Claims support when you need it most.

For help and fee-free advice, don’t hesitate to pop us a call on 02074425880 or email help@drewberry.co.uk.

Very helpful from start to finish. Talked through all the points and gave great advice.

Darren Comer
16/05/2021
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