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A benefit in kind health insurance policy refers to private medical insurance provided by an employer to an employee as part of their overall remuneration package. Instead of giving a cash payment, the employer covers the cost of health insurance, offering access to private healthcare services. While this is a valuable perk, it is classified as a taxable benefit under HMRC rules.
In the UK, benefit in kind health insurance must be declared to HMRC, typically through a P11D form. The value of the policy is treated as part of the employee’s taxable income, and benefit in kind tax will apply based on the employee’s income tax band. Employers are also required to pay Class 1A National Insurance Contributions on the benefit’s value.
When an employer provides private health insurance, it is classified as a benefit in kind (BIK for companies) because it offers a non-cash advantage to the employee. Even though you’re not receiving money, the value of the private health insurance is still considered part of your overall income for tax purposes. As such, benefit in kind tax on health insurance applies, and you’ll typically see it reflected in your annual tax summary.
HMRC treats employer-provided medical insurance as a taxable perk, and it must be declared on a P11D form. This means your PAYE tax code may be adjusted, and you may owe additional income tax depending on the policy’s value. Employers must also pay Class 1A National Insurance Contributions on the benefit. In short, if you’re asking, “Why is health insurance a benefit in kind?” — it’s because it gives you a personal benefit outside of your salary.
Yes, private health insurance provided by your employer is a taxable benefit in the UK. This means it qualifies as a benefit in kind, and you may be liable to pay income tax on the value of the policy. It doesn’t matter if you actively use the medical cover or not — simply having access to it is considered a taxable perk by HMRC.
The benefit in kind tax on health insurance is calculated based on the full cost of the insurance policy paid by your employer. It will appear on your P11D and may influence your PAYE tax code, leading to higher deductions in your monthly payslip. Many employees search “Do I pay tax on private health insurance from work?” — and the answer is yes, unless the insurance is provided in very specific exempt cases (e.g. some temporary travel cover).
Employers also pay Class 1A NICs on the benefit.
The employee is responsible for paying the tax on any benefit in kind health insurance they receive. While the employer arranges and funds the private medical insurance policy, the value of that cover is treated as taxable income for the employee. As such, HMRC adjusts the employee’s PAYE tax code to collect the extra income tax owed on the benefit.
In practice, you won’t receive a separate tax bill for the health insurance benefit in kind, but you may notice a reduction in your take-home pay due to a revised tax code. Meanwhile, employers must pay Class 1A National Insurance Contributions (NICs) on the value of the benefit — typically 13.8%.
You pay the income tax, and your employer pays the NICs. Both parties are financially impacted by the BIK rules.
| Party | Responsibility |
|---|---|
| Employee | Pays income tax on the value of the health insurance as part of their PAYE tax |
| Employer | Pays Class 1A National Insurance Contributions (13.8%) on the benefit’s value |
| HMRC | Adjusts the employee’s tax code and collects tax via PAYE |
| P11D Form | Completed by employer to declare value of benefit for each employee |
| P11D(b) Form | Completed by employer to calculate total Class 1A NICs owed |
The value of health insurance benefit in kind is calculated based on the total cost of the policy provided by the employer. This includes the full premium paid for private medical cover, whether or not the employee uses the service. HMRC requires this value to be declared on the P11D form, and it directly impacts how much benefit in kind tax on health insurance an employee pays.
For example, if an employer pays £1,000 per year for your health insurance, this amount is added to your taxable income. Your PAYE tax code may be adjusted to reflect the extra liability. The taxable value includes coverage for dependants if their names are on the same policy.
| Annual Policy Cost | Employee Tax Band | Estimated Tax Payable | Employer NIC (13.8%) |
|---|---|---|---|
| £500 | Basic Rate (20%) | £100 | £69 |
| £1,000 | Higher Rate (40%) | £400 | £138 |
| £1,500 | Additional Rate (45%) | £675 | £207 |
Yes, receiving private health insurance as a benefit in kind does affect your PAYE tax code. When your employer provides this type of cover, HMRC adds the value of the policy to your taxable income. Rather than billing you directly, they update your PAYE tax code to recover the tax due over the year.
For instance, if your employer pays £1,200 annually for your health insurance, your tax code may be adjusted so you pay income tax on that amount spread across your monthly payslips. The adjustment is automatic, and you'll typically see a lower tax-free personal allowance on your payslip.
Yes, if your employer provides private medical insurance, it is classed as a benefit in kind, and you will be taxed on it. HMRC treats this as part of your total remuneration package. Even though you don’t receive cash, it’s still considered a taxable benefit that affects your income tax obligations.
The benefit in kind tax on health insurance is applied based on the cost of the policy to your employer. This amount is added to your taxable income, and HMRC adjusts your PAYE tax code accordingly. You won’t receive a separate tax bill, but you’ll notice the change in your monthly take-home pay.
Unless it falls under an HMRC exemption (such as health checks or counselling services for specific issues), Most standard policies are taxable.
Receiving health insurance as a benefit in kind offers several tangible advantages. Most notably, it gives employees access to private medical treatment, often with reduced waiting times, a broader choice of specialists, and faster diagnosis. Although it’s a taxable benefit, the overall value can outweigh the personal tax cost, especially for higher-tier policies.
From an employee perspective, the main benefits include:
Quicker access to private healthcare
Potential inclusion of dependants
Less disruption to work due to faster treatment
For employers, offering benefit in kind health insurance is a strong recruitment and retention tool, signalling a commitment to staff wellbeing. While there are tax implications for both parties, the perk is still highly valued in the workplace.
If you're unsure how this affects your tax position, the team at Pulse can advise on how best to manage your BIK liabilities.
Whether health insurance as a benefit in kind is worth it depends on personal circumstances. For many employees, the access to private medical care far outweighs the additional tax liability. Even with the benefit in kind tax applied, the out-of-pocket cost can be significantly lower than arranging equivalent cover independently.
Considerations include:
The value of the policy vs. your tax band
How often you use healthcare services
Whether the policy includes dependants
If you fall ill and need fast diagnosis or treatment, benefit in kind health insurance can be invaluable. From an employer’s view, it demonstrates care for staff wellbeing and can reduce long-term sickness absences.
Before deciding, it’s a good idea to compare the estimated tax you’ll pay with the policy’s overall value. Pulse Accountants can help you calculate the actual impact on your take-home pay.
HMRC classifies employer-provided private medical insurance as a taxable benefit in kind. That means it is not exempt from income tax, and both the employee and employer have obligations. The value of the benefit is reported on a P11D form and included in the employee’s overall taxable income.
HMRC’s stance is clear: if the benefit provides a personal advantage to the employee, it is subject to tax. The following apply:
Employees pay income tax based on their tax band
Employers pay Class 1A National Insurance Contributions (NICs)
There are few exemptions, and most standard policies fall under the benefit in kind rules. Any errors or underreporting can lead to penalties, so it’s important to keep records and report accurately.
Pulse can guide both employers and employees through BIK compliance to avoid unexpected tax issues.
Employees generally do not need to report benefit in kind health insurance themselves—this is the responsibility of the employer. Employers must report the value of any private medical insurance provided to staff on a P11D form submitted annually to HMRC.
However, it’s good practice for employees to:
Check their PAYE tax code for adjustments
Review their annual P11D form
Ensure that reported benefits match the insurance received
HMRC will adjust your tax code to account for the value of the benefit in kind, which may reduce your personal allowance. If you suspect an error or haven’t received a P11D, it’s wise to follow up with your employer or accountant.
For support with reviewing or understanding your P11D, speak to the Pulse Accountants team—we’re here to help.
Yes, you can opt out of employer-provided health insurance that’s treated as a benefit in kind. While private medical insurance can be valuable, some employees prefer not to take on the associated tax liability.
Before opting out, consider:
The actual tax cost vs. the value of the cover
Whether it includes family members
How frequently you access private healthcare
If you choose to opt out, make sure this is confirmed in writing with your HR or payroll department. Your tax code may need adjusting if your employer has already reported the benefit.
It’s always a good idea to calculate the impact on your tax before making a decision. If you’re unsure, contact Pulse—we can help you understand whether keeping or cancelling the benefit makes more sense financially.
Employers providing benefit in kind health insurance must comply with HMRC rules. This includes accurate reporting, timely submissions, and appropriate tax contributions. Specifically, employers are required to:
Report the value of the policy on a P11D for each relevant employee
Submit a P11D(b) to declare and pay Class 1A National Insurance
Keep clear records of the policy costs and who receives the benefit
Failure to comply can result in penalties or interest charges. Employers should also ensure that employees understand how the benefit affects their tax code.
If you’re an employer offering health benefits and need help staying compliant with BIK rules, speak to Pulse. We provide accountancy support tailored to employer responsibilities.
Health insurance benefit in kind is reported on the P11D form under the section “Medical Health Insurance.” The value shown is the annual cost of the insurance policy provided by the employer, including any cover for dependants.
This amount is used by HMRC to adjust the employee’s PAYE tax code and calculate the appropriate income tax due. The employer also uses the figure to calculate Class 1A National Insurance Contributions, which are reported on the P11D(b).
Employees should receive a copy of their P11D each year, usually by 6 July, and should:
Check the reported figures for accuracy
Compare the value to the cover they received
Contact HR or their accountant if discrepancies arise
If you're confused about interpreting your P11D or how it affects your take-home pay, the Pulse team is happy to help.
Yes, but indirectly. While employees do not pay National Insurance Contributions (NICs) on health insurance benefit in kind, employers are required to pay Class 1A NICs. This is based on the value of the policy provided.
Here’s what it means:
Employees: pay income tax, but not NICs on the BIK
Employers: pay 13.8% Class 1A NICs on the BIK value
So although your NICs don’t increase, your employer’s payroll costs do. That said, it doesn’t usually affect your take-home pay beyond the income tax adjustment.
Employers need to ensure this is accurately calculated and submitted to HMRC annually. If you're a business unsure how BIK impacts your NIC liabilities, Pulse can provide guidance on correct payroll procedures.
Health insurance is not usually eligible for salary sacrifice arrangements, due to HMRC’s Optional Remuneration Arrangements (OpRA) rules. These rules prevent employees from gaining a tax or National Insurance advantage when exchanging salary for benefits in kind.
Under current legislation:
Private health insurance offered via salary sacrifice is taxed on the higher of the salary given up or the benefit’s cash value
The result is that salary sacrifice offers no real tax saving for this benefit
Employers can still offer health insurance as a BIK, but it must be reported appropriately. There may be exceptions for specific workplace health schemes, but most standard private medical insurance is not eligible.
If you leave your job, your entitlement to benefit in kind health insurance usually ends immediately unless agreed otherwise in your contract. Your employer will report the BIK value up until your leaving date.
Here’s what typically happens:
Your P11D will reflect partial-year coverage
HMRC may issue a revised tax code
If over- or underpaid, tax may be balanced via your self-assessment or PAYE adjustment
Your new employer may or may not offer health insurance, so be sure to review your new benefits package carefully. If there's a gap in coverage and you rely on private healthcare, consider interim cover options.
Have questions about how your BIK status changes with new employment? Get in touch with Pulse for tailored support.
Most employer-provided health insurance is considered a benefit in kind, but there are a few exceptions. The key distinction lies in whether the benefit is provided solely for business reasons or if it serves the personal benefit of the employee.
Examples that are not typically taxed as BIK:
Eye tests and glasses required solely for screen work
Counselling under an employee assistance programme
Travel-related medical cover for business trips
Standard private medical insurance covering day-to-day treatment or elective care is taxable and must be reported. Employers should review policy terms to determine if the cover qualifies as exempt.
If you're unsure whether your health insurance counts as a BIK, the Pulse team can help clarify based on HMRC guidance.
| Type of Health Cover | BIK Applies? | Notes |
|---|---|---|
| Standard private medical insurance | Yes | Most common form; taxable if paid by employer |
| Eye tests for screen users | No | Exempt when required for business-related display screen equipment use |
| Counselling via employee assistance programme (EAP) | No | Exempt if limited to work-related stress or welfare support |
| Medical insurance for overseas business travel | No | Exempt when solely for business trip purposes |
| Cover for dependants on the same policy | Yes | Taxable as part of the employee's BIK total |
To calculate the tax impact of benefit in kind health insurance:
Determine the annual cost of the policy paid by your employer
Add this value to your taxable income
Apply your income tax rate (e.g. 20%, 40%, 45%)
Example: If your employer pays £1,000 annually and you're in the 20% tax band, you’ll pay roughly £200 in additional tax across the year.
HMRC will usually adjust your tax code to collect this through PAYE. You can also use a BIK calculator to estimate your exact liability.
If you're unsure about your specific case or need help forecasting your annual tax, the Pulse accountants team can walk you through the numbers.
Directors can receive health insurance as a benefit in kind, but it is not tax-free unless it falls under a specific exemption. As with employees, the value of the cover is treated as a taxable benefit and must be reported on the P11D.
However, directors of limited companies often have more flexibility in how benefits are structured. Some may consider:
Including the cost in the company’s expenses (with corporation tax impact)
Offering a structured remuneration package that includes BIKs
It's important to remember that HMRC applies the same rules to directors as to staff—so standard private medical insurance is taxable.
Pulse can advise directors on the most tax-efficient way to provide health benefits within HMRC guidelines.
Handling benefit in kind (BIK) health insurance in-house might seem simple—but getting it wrong can result in costly penalties and compliance risks. Without expert guidance, businesses often make reporting mistakes or overlook important HMRC deadlines.
Here are some common risks:
Incorrect P11D reporting – Misstating the value of health insurance can trigger investigations or fines.
Missed Class 1A NIC liabilities – Employers are often unaware they must pay NICs on BIKs, leading to underpayments.
Outdated tax code adjustments – Failure to notify HMRC correctly can leave employees over- or underpaying tax.
No audit trail – Lack of documentation can make it difficult to defend your records in an HMRC review.
Even small errors can add up, especially if they're repeated over multiple tax years. If you’re unsure about your obligations, now is the time to get support. Don’t leave your BIK compliance to chance—contact Pulse today.
At Pulse Accountants, we specialise in helping businesses stay fully compliant with benefit in kind (BIK) reporting. Health insurance is one of the most commonly mismanaged BIKs, and we’re here to take the stress out of the process.
Our tailored support can help you:
Accurately report BIKs on P11D and P11D(b) forms
Calculate correct Class 1A NICs for each employee
Ensure employee PAYE codes reflect accurate benefit values
Avoid costly HMRC penalties by meeting all deadlines
We work with both small businesses and larger companies to streamline BIK processes, offering peace of mind and reliable reporting. We also advise on how to structure health insurance packages in the most tax-efficient way.
Let us handle the complexities so you can focus on running your business. Get in touch with Pulse Accountants to protect your business from avoidable tax mistakes.
Choosing Pulse Accountants means choosing a team that understands the ins and outs of benefit in kind (BIK) health insurance—and how to make it work for your business. We combine deep tax expertise with a proactive, personalised approach that keeps you compliant and confident.
Here’s why businesses choose Pulse:
Specialist knowledge in employer health benefits and BIK reporting
Clear, jargon-free advice tailored to your business structure
Dedicated support with P11D submissions and payroll impact
Flexible service whether you're a growing SME or a limited company director
We don’t just tick boxes—we help you plan, prevent errors, and optimise tax efficiency. With Pulse, you get a partner who genuinely cares about your success.
Need expert advice on your health insurance benefit in kind? Contact the Pulse team today and let’s get started.
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