If you provide health insurance the premium you pay is a tax deductible expense, however all the employees and directors who receive this benefit will have to pay tax on the value of the benefit. 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 change of 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 at 13.8% will be payable by the employer on the total value of the health insurance provided. This payment is also a tax deductible expense.
Each employee who receives the benefit of health insurance during the tax year must be given a copy of their P11d before 6th July following the end of the tax year. The P11ds and P11d(b) which reports the Class 1A National Insurance due must be submitted to HMRC by 6th July and payment made by the employer by 22nd July.
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.
