Is Company Health Insurance a Taxable Benefit? UK Tax Facts
Last checked: 31 October 2026
Yes, in most cases. According to HMRC guidance on GOV.UK, medical insurance that an employer provides for an employee is usually a taxable benefit in kind. The employee pays income tax on its value, and the employer pays Class 1A National Insurance on it. Some health benefits are exempt, and the exact treatment depends on how the cover is arranged and paid for.
This page sets out the HMRC rules as facts. It is not tax guidance for any particular business or person. For how a scheme works in general, see what is business health insurance.
What is a benefit in kind?
A benefit in kind is something an employee gets from their job that is not paid as salary, such as private medical insurance. HMRC treats most of these benefits as part of the employee's taxable income.
How is company health insurance reported?
GOV.UK sets out three main situations:
| How it is arranged | What HMRC says the employer does |
|---|---|
| The employer arranges and pays the provider directly | Report it on form P11D and pay Class 1A National Insurance on the value of the benefit |
| The employee arranges it, but the employer pays the provider | Report it on form P11D and add the value to the employee's earnings for Class 1 National Insurance |
| The employer reimburses the employee's costs | This counts as earnings: deduct PAYE tax and Class 1 National Insurance through payroll |
GOV.UK also states that the same rules apply whether the employer gives a cash allowance or extra salary to meet medical costs.
What value is taxed?
According to GOV.UK, the value to use is the cost to the employer of providing the treatment or insurance. If the employer reimburses the employee, the value is the amount reimbursed.
Class 1A National Insurance
Class 1A National Insurance is paid by the employer, not the employee, on most taxable benefits. GOV.UK lists the Class 1A rate for the 2026 to 2027 tax year as 15%. Employers report and pay Class 1A on expenses and benefits after the end of each tax year.
What is exempt?
GOV.UK lists some health benefits that do not need to be reported to HMRC and carry no tax or National Insurance. The main ones linked to health cover are:
- Health checks: periodic medical check-ups or health screening, but only once a year.
- Work-related injury or disease: treatment or insurance for injuries or diseases that result from the employee's work.
- Treatment abroad: medical treatment or insurance for an employee who is working outside the UK and needs treatment there.
- Recommended medical treatment up to £500: treatment that helps an employee return to work (see below).
The £500 recommended medical treatment exemption
HMRC's Employment Income Manual (EIM21774) sets out the conditions. The exemption covers up to £500 per employee in each tax year where:
- the employee has been assessed as unfit for work, or has been absent, because of injury or ill health for at least 28 consecutive days;
- the treatment is recommended by a health care professional as part of occupational health services;
- the recommendation is made to help the employee return to work;
- the recommendation is in writing, is given to both the employer and the employee, and names the treatment.
Costs above £500 are taxed in the normal way. This exemption is about specific treatment costs. It does not make a company health insurance premium tax free.
What about salary sacrifice?
Some employers offer health insurance through salary sacrifice, where the employee gives up part of their salary in return for the cover. According to GOV.UK:
- medical treatment or insurance provided through salary sacrifice must be reported, even where it would otherwise be exempt;
- if the cost of the insurance is less than the salary given up, the salary given up is the value that is reported instead of the cost.
HMRC's manual also states that the £500 recommended medical treatment exemption does not apply to treatment provided through salary sacrifice.
The full rules are on GOV.UK under "Expenses and benefits: medical or dental treatment and insurance".
Getting a quote
Prices and cover differ between insurers and depend on your business and staff. Quotes are not given on this website. The form asks a few short questions, such as how many employees you have and whether you already have a policy, plus your contact details. A business health insurance broker then calls you to talk through the options. If you send your details outside office hours, the call may come the next working day.
Sources (checked 2026-10-31):
- GOV.UK, Expenses and benefits: medical or dental treatment and insurance, What's exempt: https://www.gov.uk/expenses-and-benefits-medical-treatment/whats-exempt
- GOV.UK, Expenses and benefits: medical or dental treatment and insurance, What to report and pay: https://www.gov.uk/expenses-and-benefits-medical-treatment/what-to-report-and-pay
- GOV.UK, Expenses and benefits: medical or dental treatment and insurance, Work out the value: https://www.gov.uk/expenses-and-benefits-medical-treatment/work-out-the-value
- GOV.UK, Rates and thresholds for employers 2026 to 2027: https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2026-to-2027
- HMRC Employment Income Manual, EIM21774, Recommended medical treatment to help an employee return to work: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21774
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