Medical insurance benefit tax calculator, 2026/27

How this is calculated

Private medical insurance paid for by an employer is one of the more straightforward benefits in kind to value: the taxable amount is simply the cost the company actually incurs for the policy, not some notional or reduced figure.

That cost is added to your other income and taxed at your marginal rate, either through a P11D and self assessment adjustment or, increasingly, through payrolling of benefits where the employer spreads the tax through your payslip during the year.

The company separately pays Class 1A National Insurance at 15% on the same premium figure, which is a real cost to the business and should be budgeted for alongside the premium itself.

Is company-paid medical insurance still worth it?

Because the whole premium is taxable, a higher-rate taxpayer effectively pays 40% of the premium in extra tax, on top of the employer's 15% NIC. For a director who could otherwise pay the premium personally from taxed income, the comparison is close, and the answer often depends on whether the company can obtain materially cheaper group rates than an individual can.

Some directors instead take a slightly higher salary or dividend and buy insurance privately, avoiding the employer NIC leg, though group schemes can still be cheaper overall.

Related benefits taxed differently

Health screening (one basic check a year) and certain workplace eye tests and vaccinations can be provided tax-free, unlike ongoing private medical cover.

Employer-funded health cash plans and dental insurance are usually taxed in the same way as medical insurance, as the exact cost of provision.

Do I need to report medical insurance on a P11D?

Yes, unless your employer has registered to payroll benefits in kind, in which case the tax is collected through your payslip during the year instead of via a P11D and separate tax bill afterwards.

Is medical insurance ever tax-free?

Only in narrow cases, such as insurance covering treatment needed solely because of duties performed abroad, or where it forms part of an excepted group life or injury benefit; general private medical cover is almost always taxable.

Does the company get corporation tax relief on the premium?

Yes, the premium is a normal deductible business expense for corporation tax purposes, provided it is paid wholly and exclusively for the business, which employee benefits generally satisfy.

Is it cheaper to give a cash allowance instead of insurance?

Rarely, because a cash allowance is subject to income tax and employee and employer National Insurance, whereas the insurance benefit only attracts income tax and employer Class 1A NIC, with no employee NIC charge.