If you are a company director or a sole proprietorship, health insurance can help you access private healthcare and get back to business. Here’s what you need to know about paying for health insurance through your limited liability company.
Most self-employed people do not receive sick pay, so if you get sick, you will start losing income. Even if the business can function without you for a while, it will begin to suffer if you are not there. Private health insurance allows you to receive private treatment and return to work quickly without spending time on an NHS waiting list.
How does private health insurance work?
Health insurance covers private medical treatment of acute conditions, basically everything that can be cured during treatment.
There are different policies on the market so you can choose the cover that suits your needs and budget. You then pay the premium to your insurer and contact them to make a claim when you need treatment.
How can my limited liability company pay for my health insurance?
The choices you make about your health insurance will depend on the structure of your business and the type of insurance you need. If you have registered a limited company with Companies House but would otherwise be a sole trader, you will simply need a single policy.
However, if you employ a team, you can opt to provide them with health insurance under a group policy. Whichever option suits you, your company pays the premium or you pay it and your company reimburses the costs. The choice you make will also affect how you are taxed.
Individual policies
If you only want health insurance for yourself, you can choose a policy that suits your needs. Each insurance company offers basic coverage and a range of add-ons so you can add the elements that are important to you and tailor your policy to your circumstances and budget.
Each insurer has a different approach to health care, with some offering more comprehensive coverage for certain conditions or treatments and others offering incentives to help you live a healthier life. You can choose the right approach for your lifestyle with one policy.
Can my policy cover someone else?
Many insurance providers offer policies that allow you to add your spouse and children. You can choose this type of coverage and still pay the premium through your company. Some insurers offer a discount if you take out insurance as a couple. You can also be able to add your children at no extra cost or pay just for the first one.
If you decide to extend your coverage to your family, it’s important to look at the tax implications to help you decide; more on that below.
Group health insurance
If you have employees and want to provide health insurance for them as well, you may be able to choose a group policy. Group health insurance works on the same principles as an individual policy; covers more people. It is highly sought after as an employee benefit, demonstrating your commitment to employee well-being. This could help you attract new employees and take care of the ones you already have.
If they need treatment, waiting times for NHS treatment could be long; private health insurance helps them get back to work faster. Even if they don’t need to take time off, insurance can give them access to other types of support. Most policies include access to 24/7 GP services, offering flexible appointments to suit your work and other commitments. Many providers also offer helplines and other mental health support resources. Research has shown that it can improve the overall health, well-being and productivity of your team.
Can I get group health insurance if I have a small business?
Generally, you will need at least three employees to take out a group policy. However, some providers will offer programs to businesses with as few as two employees, which is perfect for small business owners.
If you have more than 250 employees, a corporate policy designed for larger companies will give you access to more support that reflects the complexity of managing a larger workforce.
Will my staff be personally taxed?
When you take out health insurance for your staff, they will be taxed on the value of the premium. Many companies arrange to deduct this tax through PAYE tax payments each month.
What are the tax implications when my limited liability company pays for my health insurance?
Health insurance premiums are an allowable business expense against your income tax bill, however, HMRC also treat them as a P11D allowance in kind. This means it’s a taxable benefit, so you’ll need to report it on a P11D form and pay Employer National Insurance contributions as a business. If you personally pay for health insurance and claim a premium refund from your company, you will need to treat it as earnings on your personal tax return and pay taxes accordingly.
Are there exceptions?
Certain types of employee health insurance are exempt, so you don’t have to pay additional tax. This includes:
- One medical examination per year.
- Vision tests for staff using display equipment as these are required by law.
- Glasses or contact lenses are only required to work with screens or monitors.
- Treatment abroad if your employee works abroad.
- Treatment of industrial injuries or diseases resulting from their work.
- Treatment to help the employee return to work.
More guidance on tax rules can be found here. However, it is crucial to get advice from your accountant that reflects your circumstances.
Is it tax efficient to pay for private health insurance through my limited company?
If paying for private health insurance through your limited company saves you money, it seems like the perfect choice. However, LLC owners need to consider whether this is the most tax efficient approach. You’ll need to take into account National Insurance Class 1a contributions, income tax and profit tax relief, and consider the net cost when making your decision. There is no easy answer and you should always seek advice from your accountant based on your tax position, but here are some points to consider.
Are you a basic or higher rate taxpayer?
When your company pays your premium, HMRC will treat it as compensation in kind, so you will pay income tax on the value of the compensation, which is equal to the total cost of the premium. The amount you pay will differ depending on whether you pay basic or higher rate tax. It could also affect your personal allowances if your taxable income exceeds £100,000.
Do you have a salary or dividend income?
This may be important to consider if you are self-paying and do not have health insurance as part of your benefit package because you are paying out of your net income.
Dividends and salaries are taxed at different rates. Dividend income will also be paid net of income tax, so you will need to consider how much income your business will need to generate to cover the actual costs of your dividends and health insurance.
What is the total cost of your company?
Any profit tax relief applied. If you receive dividends, it pays to calculate how much income your business needs to generate to fund the cost of your insurance premium after corporation tax and income tax are deducted. This could be more than the total cost of paying the company premium, class 1a national insurance and your tax liability after filing the P11D.
Calculations are unique to you, so expert advice is essential.
Getting expert advice
Your accountant can provide you with a personalized summary of your tax position and the total cost of paying your health insurance premium instead of paying in person.
Expert advice on private health insurance
There are many different policies on the market, and the right one for you will depend on your personal circumstances and budget. Speaking to an FCA authorized broker will give you detailed information about the products available and the costs for your business.
Waiver: This information is general and what is best for you will depend on your personal circumstances. Talk to a financial advisor or do your own research before making a decision.
