Is Private Medical Insurance Allowable expense for a Limited Company?

The simple answer is Yes, But there are certain tax obligations. If a company is paying for the private medical insurance of an employee or a director, this will be regarded as an allowable expense for the company/Business and the company will get corporation tax relief on premiums.

Tax Obligations:

Private medical insurance provided to employees or director will be considered as Benefit in Kind, so employees pay tax and national insurance (NI) on premiums.

Obligations when you arrange and pay the provider directly for treatment or insurance

You must:

• report it on form P11D
• pay Class 1A National Insurance on the value of the benefit

Obligations when your employee arranges treatment or insurance, but you pay the provider

You must:

• report it on form P11D
• add the value of the benefit to the employee’s earnings when deducting and paying Class 1 National Insurance (but not PAYE tax) through payroll.

For small companies with sole director, we do not recommend to take insurance from the company as you might end up paying more than what you will save. An accountant will charge you a fee to complete P11D, and then you will have to pay tax & N.I on the premiums as well.

Say the yearly premium is £1000, this will save you £190 in terms of corporation tax, but typically an accountant will charge you £100 to £150 plus vat to complete P11d and then tax & N.I will be on top. Therefore, it may be worth paying for medical insurance personally rather than from the Limited company.

Please get in touch with us, if you need further assistance.

Source HM Revenue & Customs

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