Glossary · UK
What is Private Medical Insurance (PMI)?
Health insurance covering private hospital treatment. If provided by an employer, it is a taxable Benefit in Kind, increasing income tax and NI liability.
Full Definition
Private Medical Insurance (PMI) is health insurance that covers the cost of private medical treatment, including consultations, diagnostic tests, hospital stays, surgery, and sometimes mental health and physiotherapy, depending on the policy. It allows policyholders to bypass NHS waiting lists and access private facilities. PMI can be arranged personally or provided by an employer as part of a benefits package. When an employer pays for or subsidises PMI for an employee, it constitutes a taxable Benefit in Kind (BIK). The annual premium paid by the employer is added to the employee's gross earnings for tax purposes, and the employee pays Income Tax at their marginal rate on that amount. Class 1A National Insurance is also due from the employer on the value of the benefit, reported annually on the P11D (or P11D(b)) form, or the benefit can be payrolled. There is no BIK charge for HMRC-approved medical treatments covered under an employer's occupational health scheme, or for up to £500 per year of recommended medical treatments. When comparing employment packages, factor in the post-tax cost of the PMI benefit — a £2,400 annual premium adds £2,400 to your taxable income, costing a higher-rate taxpayer approximately £960 in additional tax. Alternatively, some employers offer PMI through salary sacrifice, which can reduce the NI cost.