Providing your employees with comprehensive health insurance benefits helps to attract and retain top talent, but it also works to keep your employees healthy and productive. In the United Kingdom, there is some tax relief available for employers who provide health insurance for their employees, which can help to make these employee benefits more affordable.
In this article, we will discuss the specifics of the tax relief available for business health insurance in the UK, and how you can take advantage of this to provide your employees with the best possible benefits. We will also give an overview on what types of health insurance are covered by the relief, so you can make sure that you are getting the most from your benefits package.
How does health insurance affect my taxes?
HMRC taxes you differently depending on whether your health insurance plan is a personal policy, or a group health insurance policy taken out by the company you work for. Personal policies are exempt from tax, but employees receiving health insurance provided by their companies may have to pay tax.
According to MediCompare, directors or owners of unincorporated companies (sole traders or people in partnerships, for example) are able to deduct the cost of their employees’ health insurance from the business’s taxable profits.
If a company provides financial support towards medical insurance for employees, this is regarded as a ‘benefit in kind’ and the employee must pay personal tax on it. However, the health insurance they take out for themselves is classed as a personal expenditure and is not eligible for tax relief.
Every year, employers submit ‘P11D’ forms to the HMRC, which details the end-of-year expenses and benefits of the company. On top of this, a P11D(b) form is submitted which details the amount of Class 1A National Insurance is due on the expenses and benefits given to employees. If an employee earns over £8500 in that year, they owe tax on the amount of the benefit they received.
What Is a P11D form?
Also known as the P11D expenses and benefit form, this is a form issued by HMRC. Employers submit this form at the end of the tax year for every employee that received benefits (such as health insurance) on top of their income.
What tax-free medical benefits can employees get in the UK?
In the UK, employees may be able to get the following tax-free medical benefits:
- Health screenings
- Vision check-ups (for computer desk workers)
- Insurance for expats
Is private health insurance a good investment for business?
Private health insurance can be an alluring perk for potential employees during the hiring process. It could provide a top-level incentive to attract the highest level of talent to your company both due to the financial benefit of not paying for healthcare, and also for the emotional benefit of knowing their employer cares about their wellbeing.
Healthier employees are also more likely to be productive. Improved health results in less time off work. Even with health concerns that are not too severe, getting them checked out and addressed will mean your employees can spend less time worrying about their health.
