Can my limited company pay for health insurance?

Private health insurance provides you with quick access to medical treatment. By contrast, NHS treatment can involve lengthy waiting times, which could impact your income and productivity if you need time away from work.

Private health insurance policies include core coverage such as cancer care, in-patient treatment, and some out-patient coverage, depending on your chosen policy and provider. Policies typically also include health and well-being services such as 24/7 virtual GP appointments, telephone helplines, and health assessments. You can also add optional extras to give you more comprehensive coverage and a broader range of treatments.

When you need treatment, you can contact your health insurance provider to claim.

Group health insurance policies are typically only available to companies with at least two employees, meaning you won't be eligible if you're a sole trader with a limited company. In those circumstances, you can choose an individual policy, and your limited company pays your health insurance premiums.

A group policy is an excellent choice if you want to offer employees private health insurance as an employee benefit. It can also be more cost-effective, with lower premiums per head, because your insurance company can spread the claims risk across more people. Group policies often include support services such as employee vaccination programmes and workplace well-being support that aren't available with individual health insurance policies.

As we've mentioned, private health insurance provides core coverage and various optional extras which you can add to extend your coverage at an extra cost. Every policy includes in-patient and day-patient private medical treatment, including surgery and cancer treatment. You'll typically find some form of mental health support, with a few health insurance providers offering more comprehensive mental health treatment as standard. Most insurers include out-patient services such as diagnostic tests and consultant appointments, or minor surgical procedures. Again, this varies depending on your chosen provider.

It's always a good idea to get professional advice to help you consider what coverage your business needs and how to make the most of your budget.

Private medical insurance covers acute conditions, meaning chronic illnesses that require long-term monitoring and management aren't covered. Health insurance also excludes pre-existing conditions, defined as any condition you or an employee sought advice or treatment for in the five years before joining the policy. However, these can be added to coverage later if you stay symptom-free.

Every medical insurance policy also includes a list of standard exclusions that varies by provider. Most insurers exclude cosmetic surgery, straightforward pregnancy and birth and emergency treatment from coverage.

Private medical insurance premiums are an allowable business expense. If your limited company pays your premiums, you can claim tax relief and reduce your corporation tax bill. However, depending on your circumstances, it may be more tax-efficient to pay for your health insurance out of your net earnings after income tax.

If you pay for your health insurance through your limited company, HMRC treats this as a benefit in kind and you'll pay income tax on the value of the benefit (equivalent to the premium cost). As an employer, you must report the benefit to HMRC, and it will impact the income tax and national insurance contributions your business and employees pay.

You can learn more about the tax requirements here, but seeking advice from your accountant or financial adviser is a must. Here are a few things to consider when deciding whether to pay for your health insurance through your limited company.

Do you receive a salary or dividends?

If you receive dividends, you'll pay a lower rate of income tax than you would if you claim a salary. It can also significantly affect your tax position if you pay for your health insurance personally rather than receiving it as part of your benefits package. The income tax rates you pay will differ depending on whether you receive dividend income, salary or a combination of both.

You'll also need to balance your personal circumstances and financial position with your business's needs. Dividend income is paid net of corporation tax, meaning you must consider how much your company must earn to cover your dividends and medical insurance. Professional guidance will help you decide on the most tax-efficient way to pay for your medical insurance.

Are you a basic rate or higher rate taxpayer?

HMRC treats private medical insurance as a benefit in kind, so you'll need to pay income tax on the value of the benefit. This is simple to calculate as it's the same as the cost of the premium.

The amount of tax you pay depends on whether you're a basic rate or higher rate taxpayer and can also impact your personal allowances depending on your overall income level. It's wise to take professional advice to consider whether this is the most tax-efficient approach.

Tax implications for employees

If you choose a group policy to provide your workforce with private medical insurance, they'll pay income tax on the cost of their premium. You'll need to use form P11D to report the benefit to HMRC and pay employers' National Insurance contributions on the value.

Alternatively, suppose you or your employees pay for health insurance and claim it back from the company. In that case, you must treat it as part of earnings and include it on your personal tax return or when calculating PAYE tax and national insurance.

Insurers have different approaches to calculating your medical insurance premiums. They'll assess the likelihood you'll claim on your policy and treatment costs in your area. Here are some of the factors they'll usually consider:

• Your postcode (treatment costs are higher in some locations than others)
• Your age (or your employees' average age with group policies)
• Your medical history
• Your job and the work your business does
• Lifestyle factors, including smoking and any dangerous hobbies
• Whether your or your employees' families can join the policy
• The level of coverage you want (comprehensive policies are more expensive than basic ones)
• The underwriting that applies to your policy

It's worth shopping around and seeking advice from a broker to find the best value for money.

Specialist advice will help you make an informed choice about your health insurance, whether you pay personally or your limited company pays your premiums. At Globacare, we provide tailored advice to help you choose the right coverage for your needs. Contact us for a comparison quote.