Private Medical Insurance is a type of insurance which gives you access to private medical treatment when you need it the most.
If you have your own limited company, as well as being able to set-up Group Health Insurance for your staff, it is also possible to purchase an individual policy for yourself using your company to pay for it.
With Business Health Insurance, your policy will be paid for and owned by your company rather than being paid for personally out of your post-tax income.
This works in a similar way to a Group Health Insurance policy, in that the policy is technically owned by the business and you may consider yourself as an employee benefiting from a company-owned policy.
Although some insurers will allow you to pay for a personal Health Insurance plan with a business bank account there are tax implications. You need to bear 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.
Health Insurance costs vary so much based on your individual profile and what you need from the cover.
To work out the average cost of Health Insurance below, we’ve searched all the major players in the UK market and assumed:
With these assumptions we have calculated pricing of a Mid-Range Health Insurance policy for different age groups as well as for individuals and couples.
£63 per month
£113 per month
When you purchase a policy independently, you don’t have to worry about tax because you will be paying your premiums from your post-tax income.
However, don’t forget that you’ll have to generate more from the company in gross income than the premium because your net income will be 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 a dividend payment 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.
Meanwhile, Health Insurance policies bought using your business count as a benefit in kind and you’d need to declare these on a P11D form.
As Health Insurance is paid for by the company with pre-tax earnings and is given in addition to your remuneration, your salary has effectively been increased without the additional amount being subject to PAYE tax.
So 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 accordingly.
As the business owner, you will also need to pay National Insurance contributions, 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.
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.
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’d always recommend discussing buying Health Insurance through your limited company with your accountant first.
Deciding on the relevant options you want to include in your Health Insurance is confusing enough let alone deciding on whether to pay for it personally or through a limited company.
We are independent experts who are here to help you make an informed decision whilst finding you the most competitive premiums on the market.
We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.
We help Company Directors set-up there Health Insurance every day.
If you need some help please do not hesitate to pop us a call on 02074425880 or email firstname.lastname@example.org.
Health & Wellbeing Expert at Drewberry
I had the pleasure of dealing with Jake Mills in organising my insurance. Jake was fantastic to deal with — his patience and understanding really helped.