Most self-employed people don't get sick pay, so if you fall ill, you'll start to lose income. Even if the business can run without you for a while, it will begin to suffer if you aren't there. Private health insurance allows you to be treated privately and return to work quickly without spending time on an NHS waiting list.

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How does private health insurance work?

Health insurance covers private medical treatment for acute conditions, basically, anything that can be cured with a course of treatment.

There are various policies on the market so that you can choose the cover that meets your needs and budget. You then pay a premium to your insurer and contact them to make a claim when you need treatment.

Limited company paying for health insurance
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How can my limited company pay for my medical insurance?

The choices you make in respect of your health insurance will depend on the structure of your company and the kind of insurance you need. If you've registered a limited company at Companies House but would otherwise be a sole trader, you'll simply need a single policy.

However, if you employ a team, you can opt to provide them with health coverage under a group policy. Whichever option is right for you, your company pays the premium, or you pay it, and your company reimburses the cost. The choice you make will also have an impact on how you're taxed.

Single policies

If you only want health insurance for yourself, you can choose a policy that fits your needs. Every insurance company offers core cover and a range of optional extras so that you can add the elements important to you and tailor your policy to your circumstances and budget.

Each insurer takes a different approach to healthcare, with some offering more comprehensive cover for specific conditions or treatments and others offering incentives that help you live a healthier life. You can choose the right approach for your lifestyle with a single policy.

Can my policy cover anyone else?

Many insurance providers offer policies which allow you to add your spouse and children. You can choose this type of cover and still pay the premium through your company. Some insurers offer a discount if you take out cover as a couple. You may also be able to add your children at no extra cost or only pay for the first one.

If you choose to extend coverage to your family, it's essential to look at the tax implications to help you decide; more on that below.

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"I  requested a policy review having been with Bupa for over 10 years and was astonished by the savings I've made on mine and my husband's policy. If you're thinking about reviewing your policy do it, you won't be disappointed. "

by Erica - 27th April 2022
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Group health insurance

If you have employees and want to provide them with health insurance, too, you may be able to choose a group policy. Group health insurance works on the same principles as an individual policy; it covers more people. It's highly sought after as an employee benefit, demonstrating your commitment to employee well-being. It could help you attract new staff and look after the ones you already have.

If they need treatment, the waiting time for NHS treatment could be lengthy; private health insurance helps them get back to work more quickly. Even if they don't need to take time off, insurance can allow them to access other types of support. Most policies include access to a 24/7 GP service that provides flexible appointments that fit your work and other commitments. Many providers also offer helplines and other mental health support resources. Research has shown that this can improve your team's overall health, well-being and productivity.

Can I get group health insurance if I have a small business?

Generally, you'll need at least three employees to take out a group policy. However, some providers will offer schemes to companies with only two employees, perfect for small business owners. 

If you have more than 250 staff, a corporate policy designed for larger companies will give you access to more support to reflect the complexities of managing a more significant workforce.

Will my staff be taxed personally?

When you take out health cover for your staff, they'll be taxed on the value of the premium. Many companies arrange to deduct this via PAYE tax payments each month.

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What are the tax implications when my limited company pays for my health cover?

Health insurance premiums are an allowable business expense against your corporation tax bill, however, it's also treated as a P11D benefit in kind by HMRC. This means it's a taxable benefit, so you'll need to report it on form P11D and pay employers' national insurance contributions as a business. If you pay for your medical insurance personally and claim the cost of the premium back from your company, you'll need to treat it as earnings on your personal tax return and pay tax accordingly.

Are there any exemptions?

 Certain types of employee health insurance are exempt, so you don't have to pay additional tax. These include:

  • One health screening check per year.
  • Eye tests for staff who use display screen equipment as these are required by law.
  • Glasses or contact lenses are only needed for working with display screens or monitors.
  • Treatment overseas if your employee works abroad.
  • Treatment for industrial injuries or diseases arising out of their work.
  • Treatment that helps an employee return to work.

You can find more guidance on the tax rules here. Still, it's essential to get advice from your accountant that reflects your circumstances.

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Tax implications of health insurance for company directors

Is it tax efficient to pay for private medical insurance through my limited company?

If paying for private medical insurance through your limited company saves you money, it seems a perfect choice. However, limited company owners must consider whether it's the most tax-efficient approach. You'll need to factor in class 1a national insurance contributions, income tax and corporation tax relief and consider the net cost when making your decision. There's no simple answer, and you should always seek advice from your accountant based on your tax position, but here are a few points to consider.

Are you a basic rate or higher-rate taxpayer?

When your company pays your premium, HMRC will treat it as a benefit in kind, so you'll pay income tax on the value of the benefit, which equates to the overall cost of the premium. The amount you pay will vary depending on whether you're a basic or higher rate taxpayer. It could also impact your personal allowances if your taxable income goes over £100,000.

Are you paid a salary or dividend income?

This can be an important consideration if you're paying personally rather than having health cover as part of your remuneration package as you're paying out of your net income.

Dividends and salaries are taxed at different rates. Dividend income will also be paid net of corporation tax, so you'll need to consider how much revenue your company will need to generate to cover the actual cost of your dividends and health insurance.

What's the overall cost to your company?

Any corporation tax relief has been applied. If you receive dividends, it's worth calculating how much income your business needs to generate to fund the cost of your insurance premium after corporation tax and income tax have been deducted. This could be greater than the total cost of having the business pay the premium, the class 1a national insurance and your tax liability after filing P11D.

The calculations are unique to you, so getting expert advice is vital.

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Getting expert advice

Your accountant can give you a personalised summary of your tax position and the total cost of having your business pay your health insurance premium instead of paying personally.

Professional private medical insurance advice

There are many different policies on the market, and the right one for you will depend on your personal circumstances and budget. Speaking to an FCA-authorised broker will give you detailed information about the available products and the cost to your business.

Compare Health Insurance with myTribe

At myTribe, our straightforward guides give you the information you need to consider the insurance that will be right for you. We'll also give you a comparison quote and put you in touch with a high-quality, regulated broker who can give you specialist advice.

Frequently Asked Questions

How can my limited company pay for my medical insurance?

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The choices you make in respect of your health insurance will depend on the structure of your company and the kind of insurance you need. If you've registered a limited company at Companies House but would otherwise be a sole trader, you'll simply need a single policy. However, if you employ a team, you can opt to provide them with health coverage under a group policy. Whichever option is right for you, your company pays the premium, or you pay it, and your company reimburses the cost. The choice you make will also have an impact on how you're taxed.

What are the tax implications when my limited company pays for my health cover?

Down arrow icon

Health insurance premiums are an allowable business expense against your corporation tax bill, however, it's also treated as a P11D benefit in kind by HMRC. This means it's a taxable benefit, so you'll need to report it on form P11D and pay employers' national insurance contributions as a business. If you pay for your medical insurance personally and claim the cost of the premium back from your company, you'll need to treat it as earnings on your personal tax return and pay tax accordingly.

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