How is Private Health Insurance Taxed?

I have had private health insurance in the past through work and I am now considering taking out my own personal plan, I know I had to pay some form of tax on my company health insurance will this be the same on a personal plan.

Question asked by Paul Revell
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Answered by Tom Conner

The tax on private medical insurance depends on whether you have taken out a personal health insurance plan or you are joining your organisations group health insurance scheme.

 

Do I Have to Pay Tax on Personal Medical Insurance?

The taxation of a personal health insurance plan is relatively simple, as you’re paying for premiums out of your net earnings (i.e. after income tax and National Insurance Contributions have already been deducted).

That means there’s no tax to pay on individual Private Medical Insurance except for insurance premium tax (IPT) which is already incorporated in the pricing of the premiums.

 

Company Health Insurance Taxation

If your employer pays for your medical insurance premiums, the taxation is very different.

When the premium is paid by your company it’s usually eligible for corporation tax relief and paid for by your company from pre-taxed earnings.

That means Group Health Insurance is considered a taxable P11d benefit in kind and employees can then be liable to a ‘Benefit in Kind’ tax.

Tax on corporate PMI

Here, the employees’ tax codes will be altered to reduce their personal allowance to take into account their benefit in kind.

Companies also have to pay employers’ National Insurance Contributions on the cost of each employee’s Medical Insurance premium each month.

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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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