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?
When a company pays for Health Insurance on your behalf, the premiums are typically eligible for corporation tax relief. As a result, Group Health Insurance is considered a taxable P11D benefit in kind.
This means, for Group Health Insurance, employers pay National Insurance contributions on the premiums as if they were part of an employee’s remuneration.
What’s more, it’s a taxable benefit for employees and is therefore added to earnings and taxed as income.
This is charged at your highest marginal tax rate, which is determined by your total earnings, including employer provided benefits. The most common way of paying for a P11d benefit is having your tax code reduced in the following tax year to reflect the tax you need to pay on the benefit you received.
Because Individual Health Insurance is paid for with your net earnings (i.e. your income after you have paid income tax and your national insurance contributions have already been deducted), the only tax you need to pay for your policy is Insurance Premium Tax (IPT).
Insurance Premium Tax is already incorporated in the pricing of your Health Insurance Premiums, so there is no additional tax you need to worry about.
If you own your own business, you can purchase your Private Health Insurance through your own limited company. Your company will pay for the premiums while you will benefit as an employee.
If you decide to buy Contractors’ Health Insurance, you will need to pay the same tax as an employer providing a Group Health Insurance policy for their employees. This includes Employer’s National Insurance Contributions at 13.8% for the company and income tax for the contractor at their highest marginal rate.
The most tax efficient way of receiving health cover will be dependent on your circumstances.
The best course of action is to speak to a financial adviser. An expert will help you realise the most cost effective and reliable way of purchasing a Private Health Insurance policy that matches cover with cost.
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