Health insurance is often offered by employers but is it an allowable business expense?
If you provide health insurance to your employees the premiums are a tax deductible expense. However all the employees who receive this benefit will have to pay tax on the value of the benefit. This will include you as the director or owner of the business. The tax is paid by registering with HMRC to payroll the benefit in advance of the start of a tax year or by completing a P11d after the end of a tax year. Each of these methods will report the value of the benefit by month if payrolling, or annually in arrears if reporting via a P11d. Each employee will receive a tax code which reduces their personal allowance to take account of the value of the benefit.
The tax code change after a P11d is submitted will take account of the value of the benefit already received and assume the same benefit will be received in the current year, so tax will be deducted over a 12 month period for both years. If payrolling the tax will be deducted month by month.
Class 1A national insurance contributions will be payable by you, the employer, on the total value of the health insurance for your employees. This payment is also a tax deductible expense.
If medical insurance is provided as salary sacrifice the benefit is not reportable to HMRC.
There are medical expenses which you, as a an employer, can pay for which you do not need to report or deduct tax and or NI for. These include:
- Annual medical checks or health screening
- Eye tests for employees who use computer screens
- Treatment for injuries incurred as a result of their work
- Medical treatment up to £500 to help an employee return to work as long as they have been absent for at least 28 consecutive days and have been assessed by a medical professional as unfit for work during that time.