If you run a limited company, you may be wondering whether your business can cover the cost of private health insurance for you or your employees. The good news? Yes, it can but there are some important tax rules to consider.

Can a Limited Company Pay for Private Health Insurance?

Yes a limited company can pay for private medical insurance for its directors and employees. It’s treated as a business expense.

However, in most cases, it’s classed as a Benefit in Kind (BIK) by HMRC.

What It Means for the Company

• The company can claim the cost as a business expense, helping to reduce its Corporation Tax bill.
• But it will also have to pay Class 1A National Insurance Contributions (NICs) on the value of the insurance benefit.

What It Means for the Employee or Director

• The recipient of the health insurance benefit (you or an employee) will be taxed on it.
• The insurance premium amount is included in the employee’s earnings and reported using a P11D form.
• The employee will pay Income Tax on the benefit at their normal tax rate.

Are Any Health Benefits Tax-Free?

Yes some health-related benefits provided by employers are exempt from tax in specific circumstances. These include:

Annual health checks or medical screening

One per year is generally exempt from tax, provided it’s offered to all employees.

Eye tests for screen users

If employees use visual display units (VDUs) as part of their job, eye tests are tax-free under health and safety regulations.

Employer-arranged COVID-19 tests

These are tax-free if offered on a wide scale and meet HMRC’s qualifying criteria (e.g., not part of a salary sacrifice scheme).

Alternative Option: Health Cash Plans

Some companies opt for Health Cash Plans instead of full private insurance. These plans offer reimbursement for routine health costs (like dental, optical, or physiotherapy expenses) and may be a more cost-effective option.

Quick Summary

Final Thought

Health insurance can be a great perk and a valuable addition to your company’s benefits package. Just make sure it’s reported properly to avoid unexpected tax bills.

Always check with an accountant to structure it in the most tax-efficient way for your situation.