If you have your own limited company and you’re considering taking out private medical insurance, you’re probably wondering if it’s beneficial to pay for it through the business. We’ll look at what options are available for company owners and directors, and how this affects your tax bill, to help make your decision.

What is private medical insurance?

Private medical insurance, also known as health insurance, helps you access private medical care without an upfront fee. It can be paid monthly or annually, and what it covers depends on the type of policy you take out.

What private medical insurance usually covers

There’s typically 3 levels of cover.

• Day patient cover, which includes standard appointments and tests
• Outpatient cover which is for things like doctor’s consultations and anything you don’t need an overnight stay for
• And of course, inpatient cover for when you need to go into hospital

It’s important to note most private medical insurance will only cover acute conditions, for instance a broken bone or strep throat. Basically, anything severe that appears suddenly after you’ve already taken cover out, but can be healed in a short amount of time – so if you have any pre-existing long-term conditions, your new policy may not cover them.

This purely depends on the policy you take out, and there are policies which will cover specialist treatment such as cancer therapies or mental health support, but they do tend to be more expensive. These types of policies usually have no payout caps either, whereas cheaper policies might (meaning you’ll need to cover any treatment costs above the cap).

What private medical insurance doesn’t cover

Your private medical insurance usually won’t cover:

• Any preexisting medical conditions
• Chronic illnesses (for instance epilepsy, diabetes or AIDS/HIV)
• Cosmetic surgery to enhance your appearance
• Injuries related to any dangerous sports
• Normal pregnancy / any childbirth costs

Should I pay my private medical insurance through my limited company?

The good news is that paying your medical insurance through your company would be classed as an allowable business expense – which means, like any other business expense you incur, it can be deducted from your income, bringing down your Corporation Tax bill.

This obviously sounds much better than paying for it personally, but you need to consider benefits-in-kind. HMRC sees this as a non-cash benefit, so paying it through your limited company would mean:

• Your company needs to pay employer’s national insurance on the value of the benefit, and report it to HMRC
• You’ll pay income tax on the value of the benefit, and your company will deduct this through payroll

Is it tax efficient to pay my private medical insurance through my limited company?

This really depends. Although you won’t be paying the full cost of insurance as an individual, you’ll pay income tax on the value of the benefit in kind, so you’ll need to sit down and figure out how much you can pay yourself salary-wise for it to be tax-efficient.

If you take a smaller salary, and pay yourself in dividends throughout the year, it could be a more tax-efficient way of paying your private medical insurance. But, if you give yourself a much larger salary, this benefit in kind could push you into the 40% tax bracket.

Your limited company will pay employer’s National Insurance on the value of the benefit too, but it can then offset this and the original cost of the insurance against its Corporation Tax bill.

What if I’m a sole trader, can I claim private medical insurance as a business expense?

If you’re a sole trader without employees, your private medical insurance would be considered as a personal expense – so unfortunately it isn’t tax deductible.

You can always incorporate your business to be able to claim private medical insurance as a business expense, but it’s best to check with an accountant whether or not this is tax-efficient for you.

Things to consider when looking for private medical insurance

You’ll want a policy that gives you exactly what you’re looking for, without all the frills or high price tags. So, the best thing you can do is think about what you really need.

Why do you want insurance?

Is it because of the long waits at your local GP? If this is the case, you can find a policy with a 6-week wait option. This means if you’re on an NHS waiting list, and it exceeds 6 weeks, you can receive your treatment privately straight away.

This is a great way to reduce the costs of premiums, all while knowing you will receive the treatment you need within a specific timeframe.

What type of insurance are you after?

You could cut costs by only purchasing cover you really need. Remember, even if you go private, you’re still entitled to NHS treatment! For example, you can pick cover that is specifically for treatments that aren’t available on the NHS.

You could even choose what’s called a ‘guided policy’. This basically limits your choices of hospitals and specialists, but it lowers your premiums.

Think about choosing a higher deductible

If you’re new to this, don’t worry, it can be confusing. A ‘deductible’ is the cost you agree to pay for your private healthcare insurance before your insurer pays out. A higher deductible equals a lower insurance premium, but of course you need to find a balance. The higher the deductible, the more you’ll have to pay out of your own pocket for treatments. If you aren’t looking for much, just basic cover, this could be a good way to reduce costs.

It’s super important to chat to your accountant before making any decisions, as they’ll be able to work out the most tax-efficient way to go about it.

 
Need help keeping your limited company tax-efficient? Talk to the team on 020 3355 4047, or get an instant quote.