Is private medical insurance from my employer taxed as a benefit in kind?

Full answer

When your employer pays for private medical insurance, HMRC treats the premium as a benefit in kind (BIK) -- a non-cash perk with a taxable value. You are taxed on the cost to the employer of providing the cover (the gross premium, including insurance premium tax), not on any claims you make. This value is either reported on a P11D after the tax year or 'payrolled' so the tax is collected through PAYE during the year. For you, the employee, the BIK is added to your taxable income and taxed at your marginal Income Tax rate. A basic-rate taxpayer pays 20% of the premium value, a higher-rate taxpayer 40%, and an additional-rate taxpayer 45%. Worked example: if the cover costs GBP 600 a year, a higher-rate taxpayer pays GBP 240 in extra Income Tax (GBP 600 x 40%), usually collected via an adjusted tax code. Employees do not pay Class 1 NI on the benefit. For the employer, the benefit attracts Class 1A National Insurance at 15% for 2026/27 (the same rate as employer NI), so the GBP 600 example costs the employer an extra GBP 90 in Class 1A. The employer can normally deduct the premium and the Class 1A as a business expense against Corporation Tax. This affects anyone offered company PMI as part of a benefits package. It is still usually cheaper than buying equivalent cover yourself, because you only pay tax on the premium rather than the full cost, but it does quietly raise your tax bill and can change your tax code. To see the effect on your monthly take-home, add the BIK value to your gross figure and use the income tax or take-home pay calculator.

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