Is Private Health Insurance a Taxable Benefit? (UK Employer Guide)

If you offer, or are thinking about offering, private medical insurance to your team, the first question is usually about tax. The short answer: yes, employer-paid private health insurance is a taxable benefit-in-kind. The employee pays income tax on the value of the premium, and the employer pays Class 1A National Insurance at 15%. It is reported to HMRC on a P11D today, and from 6 April 2027 reporting it through payroll is currently set to become mandatory.

This is general information, not tax advice; confirm your own position with an accountant.

Is private health insurance a taxable benefit?

Yes. When an employer pays for an employee's private medical insurance, HMRC treats it as a benefit-in-kind. Because the cover has a monetary value, the employee pays income tax on it, and the employer pays National Insurance on it. The benefit does not appear as cash in the employee's pay, but it is taxed as though it were extra income.

How much tax do you pay on private health insurance?

You pay income tax on the value of the premium your employer pays, at your marginal rate. So on a policy costing, for example, £600 a year, a basic-rate (20%) taxpayer would pay £120 in tax and a higher-rate (40%) taxpayer would pay £240. The tax is normally collected through your tax code or payroll, so it reduces your take-home pay slightly rather than arriving as a separate bill.

How is it reported to HMRC?

Employers currently report private medical insurance as a benefit-in-kind on form P11D each year (it sits in Section I, "Private medical treatment or insurance"), or payroll it in real time. From 6 April 2027, payrolling benefits in kind is due to become mandatory, so most employers will report it through payroll rather than a separate P11D. The date was put back from April 2026 to give employers and payroll software more time to prepare.

What does the employer pay?

The employer pays Class 1A National Insurance at 15% (2026/27) on the value of the premium, reported on a P11D(b). The premiums themselves are usually an allowable business expense that the employer can set against corporation tax, so the net cost is lower than the headline premium. Your accountant can confirm the position for your business.

Is a health cash plan taxed the same way?

A health cash plan, which reimburses everyday costs like dental and optical, is also generally a benefit-in-kind, though the amounts are much smaller than full private medical insurance. A few specific, work-related health benefits, such as eye tests for screen users or one annual health check, can be exempt. If you are weighing the two options, our guide to private medical insurance versus cash plans compares cost and cover.

How to offer health cover tax-efficiently

Most employers simply accept the benefit-in-kind tax as the cost of offering cover their people value, and make the tax position clear so there are no surprises in a payslip. If cost is the main concern, a health cash plan gives lower-value cover at a much lower premium, and therefore a much smaller tax charge. Whichever you choose, build the Class 1A National Insurance into your budget rather than just the premium.

Where PerkIQ fits

Health cover is one of the seven categories PerkIQ scores when it audits an employer's benefits. To see how your health and insurance provision compares with best practice, you can run a free benefits healthcheck in about five minutes, or compare health insurance providers in our directory.

Frequently asked questions

Do I pay tax on company health insurance?

Yes. If your employer pays for your private medical insurance, HMRC treats it as a benefit-in-kind, so you pay income tax on the value of the premium at your marginal rate. It does not reduce your take-home pay directly; the tax is usually collected through your tax code or payroll.

How much is benefit-in-kind tax on health insurance?

You pay income tax on the premium your employer pays, at your tax rate. For example, on a policy that costs £600 a year, a basic-rate (20%) taxpayer pays £120 and a higher-rate (40%) taxpayer pays £240. The exact figure depends on the premium and your tax band.

Is private health insurance tax-deductible for the employer?

For most employers the premiums are an allowable business expense that can be set against corporation tax. The employer also pays Class 1A National Insurance, at 15% for 2026/27, on the value of the benefit. Check your own position with your accountant.

Do I need to declare health insurance on my tax return?

Usually not. Your employer reports the benefit to HMRC on a P11D or through payroll, and it is reflected in your tax code. If you complete a Self Assessment return, you may need to include the benefit, using the figure on the P11D your employer gives you.

Is a health cash plan a taxable benefit?

Generally yes. An employer-paid health cash plan is also a benefit-in-kind, though the amounts are usually small. Some specific work-related health benefits, such as eye tests for screen users or one annual health check, can be exempt. Confirm the treatment of a specific plan with your provider or accountant.