Last updated: 14 October 2026
Is private medical insurance an allowable expense for a limited company?
Yes. If your limited company pays for private medical insurance for its directors or employees, the premiums are normally an allowable expense for corporation tax. However, the cover is a taxable benefit in kind. It must be reported on a P11D, or payrolled, and the employee pays income tax on its value. The company also pays Class 1A National Insurance at 15%.
How the tax works in 2026/27
For the company
The premium is a staff cost, and it is deducted from profits before corporation tax at 19% to 25%. It must be paid for the purposes of the trade. For employee benefits, that is normally the case.
For the director or employee
The taxable value is usually the cost to the company of providing the cover. That amount is added to the employee’s income.
Worked example
A company pays £1,200 a year for a director’s medical insurance.
- Corporation tax saving at 19%: £228
- Class 1A NIC for the company at 15%: £180
- Director’s income tax at 40%: £480
- Net cost to the company after tax relief: £1,200 + £180 − £228 − (19% × £180) = £1,117.80
For a higher-rate taxpayer, the benefit costs £480 in personal tax. That is often still cheaper than paying the premium personally out of taxed income.
Exemptions to know
- Medical treatment abroad: cover for treatment while you travel abroad on business is exempt
- Health screening: one health screening and one medical check-up a year are exempt
- Recommended treatment: up to £500 a year for each employee, if it helps them return to work after sickness, can be exempt
- Employer-arranged occupational health services are generally exempt
Is it better to pay through the company?
It depends on your tax rate and how you take your income. If you would otherwise take dividends to pay the premium, compare:
- dividend tax at 10.75% or 35.75% on the extra dividend needed, with no corporation tax relief, or
- the benefit in kind route, with corporation tax relief but income tax and 15% Class 1A NIC
For many basic-rate directors, the company route works out similar or slightly better. We model both options for you.
Payrolling the benefit
New voluntary registrations to payroll benefits closed on 6 April 2026. From 6 April 2027, reporting the most common benefits, including medical insurance, through payroll becomes mandatory, and most remaining benefits follow from April 2028. See electronic P11D filing.
Sole traders
A sole trader cannot claim private medical insurance for themselves, because it is a personal expense. They can claim it for employees.
Frequently asked questions
Do I pay tax on private medical insurance from my employer?
Yes, unless an exemption applies. It is usually shown on your P11D or payslip.
Is dental or optical cover treated the same way?
Usually yes. It is a taxable benefit if the company pays for it.
Does the company need to deduct VAT?
Insurance is exempt from VAT, but Insurance Premium Tax is included in the price. There is no VAT to reclaim.
Can a company pay for my family’s cover?
Yes, but the cost of family members’ cover is also taxable on you.
Related: salary or dividends and our limited company accountants.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with benefits and expenses for your company. See our limited company accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
