Is Private Health Insurance a Taxable Benefit?

Mark Benson

Mark Benson

Money Savings Advice Private health insurance taxable benefit

If like many people you are taking out private health insurance you may be wondering whether it is classed as a taxable benefit. It will depend upon who took out your health insurance and who pays for it as to whether it will be deemed a taxable benefit.

While considering the tax consequences of private health insurance, there are obvious practical benefits.

At a time when the NHS is stretched to the limit and budgets under pressure, it seems bizarre that the authorities have deemed private health insurance as a potential taxable benefit. Surely every pound which goes into the private health sector is a pound less for the NHS to spend.

However, it is not as simple as that! Keep reading to get all the details

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Will I Pay Tax on Personal Private Health Insurance?

There are two scenarios with regards to private health insurance; either it is paid for by an individual or by an employer. In this instance, we will look at private health insurance taken out and paid for by an individual. This is not classed as a benefit in kind because it has not been paid for by a third party, so there is no additional tax to pay.


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Will I Pay Tax on Employer Private Health Insurance?

The simple answer is, yes. If you are in receipt of insurance cover paid for by your employer, then this is classed as a “benefit in kind”. As a consequence, the value of your annual private health insurance will be taxed by HMRC.

If you are self-employed, you may be able to offset the cost of private health insurance if it is deemed purely work-related. In this situation, it would be sensible to take financial advice.

What Rate of Tax Will I Pay on a Benefit in Kind?

As an employee, you would pay income tax at your normal rate, as if the full value of the private health insurance was additional income. You will not be liable to any additional employee national insurance, but your employer would pay national insurance at the relevant rate. This is where it can start to get a little complicated!

What Is Insurance Premium Tax?

Insurance premium tax (IPT) is a relatively new tax brought in by the UK government which is charged on insurance contracts at a fixed rate of 6% of the net premium.

Whether you paid for your own private health insurance premiums, in which case you will pay IPT directly, or you are in receipt of employer private health insurance, on which you will be taxed on the full amount, IPT will be taken into consideration either way.

Should I Pay Tax on Voluntary Employer Private Health Insurance?

Many employers offer voluntary private health insurance to their employees, often on discounted premiums. For larger companies, they should be able to negotiate a significant discount if they are able to provide new clients to insurance companies in volume.

It may also be possible to add your family and partner to your private health insurance. As you actually pay the premiums yourself they will not be deemed as a “benefit in kind”, but obviously you would still pay the IPT.


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Is Private Health Insurance Worth It?

Many people will be surprised to learn of IPT and the fact that employer private health insurance is taxed as a “benefit in kind”. As far as value for money, we know that the NHS is being stretched and budgets are under significant pressure.

This has resulted in ever-growing waiting lists and prompted more people to look at private health insurance for themselves and their family. Many people find that private health insurance in the UK offers extremely good value as well as peace of mind.

What Levels of Health Insurance Are There?

It is fair to say that the private health insurance market is extremely liquid, very competitive and surprisingly flexible. There are three basic levels of private healthcare which are basic, medium and comprehensive with varying premiums. The type of insurance most suitable to you will depend on your individual circumstances and budget.

How Much Is the Average Health Insurance Policy?

There really is no hard and fast rule with regards to the average health insurance policy because it will depend upon your circumstances and specific requirements. That said, some experts have suggested the average health insurance in the UK costs between £1000 and £1500 per annum.

This will give you a ballpark figure, but it is certainly not set in stone.

What Are the Factors Affecting Private Health Insurance Premiums?

You will not be surprised to learn that age, gender, lifestyle, BMI and smoking habits will have an impact on your health insurance premiums. An insurer would also take into account your medical history as well as the area in which you live.

The so-called “postcode lottery” is an unwelcome phenomenon with premium levels impacted by the local community and the more prevalent medical conditions/ailments.

How Do I Use My Private Health Insurance?

Initially, your first port of call is your GP who will refer you to a consultant/specialist with the opportunity to go private if you have the relevant cover. After being referred, it is important that you contact your healthcare insurance provider to see if you are covered for the consultation costs and any resulting treatment/surgery.

Why Do People Take Out Private Health Insurance?

There are two main reasons why people take out private health insurance; first of all, it offers peace of mind for you, your partner and family. Secondly, as NHS services continue to be stretched, we have seen many individual treatment waiting lists extended.

Private health insurance should allow you to be seen relatively quickly, which will not only positively impact your physical health but also your mental health.

Summary

There has been speculation for many years that private health insurance cover would be tax-deductible as a means of pushing people away from the NHS and towards private healthcare services. At this moment in time, there are no tax incentives to take out private health insurance although this may change as the NHS budget and services continue to be stretched.

Quick Private Medical Insurance FAQs


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How Can Money Savings Advice Help You With Private Medical Insurance?

Here at Money Savings Advice, we have partnered with some of the UK’s leading Private Medical Insurance companies. They have already helped thousands of people get the best PMI cover, and, they can do the same for you.

Choosing an independent adviser means they won’t recommend a policy unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these brokers, then click on the below and answer the very simple questions.

Mark Benson

Mark Benson

Mark has been writing professionally for over ten years for the financial sector. Having started in the financial world as a stock-broker in central London and then moving to equities trader Mark is one of our senior financial writers who has a vast knowledge of multiple financial sectors.

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