Private health and protection insurance expert and editor
If you're a company director or a one-person limited company, health insurance can help you access private healthcare and get back to running your business. Here's what you need to know about paying for health insurance through your limited company.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Certain types of employee health insurance are exempt, so you don't have to pay additional tax. These include:
You can find more guidance on the tax rules here. Still, it's essential to get advice from your accountant that reflects your circumstances.
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.
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.
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.
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.
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.
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.
Disclaimer: This information is general and what is best for you will depend on your personal circumstances. Please speak with a financial adviser or do your own research before making a decision.
Chris Steele is myTribe’s resident expert in private health insurance and healthcare, with over a decade of experience in the field. As a Chartered Insurance Institute (CII) qualified professional, he has helped countless consumers navigate private medical insurance. Regularly quoted by national media, Chris is a trusted voice in the UK insurance industry, with his insights featured in leading consumer finance publications.
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.
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.
Save up to 37%* on your insurance by comparing policies
*Based on 461 quotes between 01/22-01/23
