Frequently Asked Questions - Tax and Private Healthcare Cover
Please note that the following questions and answers serve as a general guide, and details may be subject to change.
For personalised advice, it is recommended to consult with HM Revenue & Customs (HMRC), your accountant, or a tax adviser.
Questions
Is a Limited company eligible for tax relief on the business healthcare plan?
Yes, Limited companies are eligible for tax relief on the business healthcare plan, as it falls under business expenditure. Therefore, it is advantageous for the business to cover the cost of private healthcare through its bank account.
What are the tax implications for small businesses that are not Limited Companies (unincorporated) when providing healthcare cover to employees?
For unincorporated businesses, providing healthcare cover to employees is considered a deductible expense when calculating taxable profits. It qualifies as a valid business expense and is eligible for tax relief.
Do I need to report the private healthcare cover to HMRC?
Yes, at the end of each tax year, you must complete and submit a P11D form for each employee, detailing the benefits they have received, including private healthcare cover. Additionally, you'll need to complete and submit a P11D(b) form and pay Class 1A National Insurance on the value of the benefit provided.
Am I eligible for tax relief on a private healthcare plan as the owner of an unincorporated business?
As the owner of an unincorporated business, a private healthcare plan for yourself is classified as a personal expenditure. Consequently, it cannot be claimed as a business expense.
Will employees need to pay tax on their private healthcare cover benefit?
Yes, when you provide private healthcare cover to your employees, it is considered a 'benefit in kind,' and the employee will be subject to tax on the value of this benefit.
Is healthcare cover subject to Insurance Premium Tax (IPT)?
Yes, healthcare cover is subject to Insurance Premium Tax (IPT) at the prevailing rate.
How is the value of the benefit in kind for private healthcare cover calculated?
The value of the benefit in kind is equivalent to the employee's private medical insurance premium.
When reporting this benefit in kind on the P11D form, the full amount, such as £600 in this example, should be declared. The tax that the employee needs to pay on this benefit is collected through the payroll process, and their tax code may be adjusted due to the additional benefit on top of their regular earnings.
