Is Health Insurance Tax Deductible?

Roman Danaev

19 December 2024

As you work through your taxes, you might ask yourself, “Could your health insurance premiums help lower your tax bill?” The answer isn’t simple — it depends on a few factors. These include how you got your insurance, whether you’re self-employed if you itemise deductions, and how much you’ve spent on medical expenses, including your premiums.

Let’s look at how health insurance premiums work when it comes to tax implications — rules for businesses and self-employed individuals, reporting, impact of coverage, and more.

How Is Private Health Insurance Taxed in the UK?

For employees, private medical insurance is not tax-deductible. However, they are eligible for certain tax-free health benefits, such as:

How Does Health Insurance Affect My Taxes?

Health insurance impacts your taxes, depending on whether it’s through your employer or a personal health insurance policy.

If your employer provides health insurance, the premiums are considered a benefit in kind and will be taxed as part of your income. This means you’ll pay tax on the cost of your coverage. The tax you owe is based on whether you fall into the lower or higher income range. Your total income level also affects your personal allowances, so it’s important to be aware of how it all adds up.

If your employer provides a group health insurance plan, they may offer you the option to cover the premiums yourself to be included in the policy. If you decide to pay for it, there won’t be any extra tax obligations on your part. However, if your employer uses a salary sacrifice arrangement, where your premiums are deducted from your salary before tax, things work differently. Your employer will report this to HMRC, and you’ll be liable to pay tax on the premiums when the tax year comes to a close.

However, if you have an individual policy that you pay for, the premiums are not taxed.

For self-employed individuals, you may be able to deduct health insurance premiums as a business expenditure. It’s best to check your specific situation or consult a tax adviser.

Does Private Health Insurance Need to Be Reported to HMRC?

At the end of the financial year, employers are obligated to file a P11D form. This form lists any extra benefits that workers receive from the company, such as health insurance, in addition to their regular salary.

If an employer covers the cost of insurance on an annual basis, and the employee leaves the company or cancels the coverage before the policy ends, the tax liability could carry over into the following tax year.

What Is a P11D Form?

HMRC issues the P11D Expenses and Benefits Form to report any non-cash benefits or expenses provided by an employer. Employers need to fill it out at the end of each tax year for employees who receive benefits or expenses beyond their salary. This doesn’t include typical business expenses like commuting or a company vehicle.

Please note that the P11D is different from the P11D(b). The P11D details the benefits and expenses given to employees, but the P11D(b) reports the Class 1A National Insurance contributions that the company is required to pay on those perks.

Here’s a quick explainer video on P11D:

Important for employers: Starting in April 2026, HMRC will require all taxable benefits, health insurance included, to be processed through payroll. This means P11D forms will no longer be used. HMRC will provide more details closer to the date, but it’s a good idea to start thinking about how this change will affect your payroll now so you can make sure everything is in order when the new system rolls out.

Is Healthcare Coverage Subject to Insurance Premium Tax (IPT)?

Yes, healthcare coverage is subject to Insurance Premium Tax (IPT). Since June 1, 2017, the standard IPT rate for healthcare coverage is 12%. This tax is added to your premium and paid directly to the insurer.

Your Employment Status Has an Impact

If your employer provides your health insurance, you’ll be taxed on the premiums because they’re subject to corporation tax relief (benefit in kind). This means they’re a perk you get from your job but are not included in your salary. On the other hand, if you don’t have a job or income, you won’t be taxed for having health insurance.

Is Private Health Insurance Tax Deductible for Self-Employed People in the UK?

When it comes to self-employed health insurance, premiums can be considered a business expense, especially if private medical treatment speeds up your recovery after an illness or injury.

Similarly, you can claim the cost of premiums for your family members (spouse or dependent children) as a business expense as long as the coverage is considered essential for your work and recovery. In other words, the expense must be reasonable and necessary for your business. This is the case when the health of family members impacts your ability to work.

You may also qualify for tax relief, so it’s a good idea to check with your insurer to find out if you’re eligible.

Is Health Insurance Tax Deductible for Businesses?

For businesses in the UK, premiums on health insurance policies paid for employees are considered a tax-deductible expense. This means that the company can deduct the cost of providing private insurance from its taxable profits and reduce its overall tax liability.

Health insurance premiums can also affect National Insurance contributions. How this works depends on who is paying for the insurance:

Some Tax Relief May Be Available

If you’re in charge of a business, whether as an owner, a company director, or in another leadership role, and you offer health insurance, you can lower the amount of tax you pay. If the business pays for the coverage using a business bank account, the cost of the health insurance policy can be deducted from your taxable income.

For unincorporated businesses (sole traders and partnerships), health insurance costs for employees can also be deducted from taxable profits. However, if you’re seeking a tax break on your own personal health insurance, that won’t apply. It’s considered a personal expenditure.

When employers file a P11D form to HMRC, they must report on any employees who earn more than £8,500. This form details any extra benefits, such as health insurance. Also, the P11D(b) form is required to report the Class 1A National Insurance contributions on those benefits. If your employees earn over £8,500, they’ll be taxed on any benefits they receive.

Claim Payouts Are Not Taxed

Health insurance rarely provides cash benefits directly to policyholders. Instead, claims are handled directly by healthcare providers, such as hospitals and clinics. However, if you happen to receive a cash payment from your insurance, for example, to cover the cost of opting for private treatment instead of an NHS stay, you won’t have to pay tax on that amount.