Limited Companies & Medical Expenses
Updated: Oct 26, 2020
The Benefits in the UK for Employees
Claiming Private Health Care is taxable for employees in the UK, so it is included on the P11D at the end of the year. Providing the payment was made towards a company group healthcare policy, the employee will not need to pay National Insurance that would have otherwise been incurred if they had taken the cash and paid for it themselves. This will save the employee 12%, and they may possibly pay a lower overall bill, as the company leverages their buying power for their employees.
Tax Trap: If the healthcare policy is provided for one individual, the payment will be taxed as earnings, and both NI and Tax will be due just as if they had taken the value as a salary and bought it themselves.
Any insurance or healthcare costs incurred while an employee is abroad on business are both NI and Tax-free providing the company pays.
It is always better for the company to pay the premium for you.
The benefits for the UK Company
The company will be allowed to deduct all medical expenses from its profits, saving corporation tax. Unfortunately, employers NI will still need to be paid, which is 13.8%. The payment to HMRC will need to be made by the 22nd of July after the companies year-end in which the premium was paid.
If you need to use specific display equipment, the company can pay for an eye test and eyewear specific for the work. If the eyewear is used for home and work use, only the work-related costs can be claimed and any other costs should be included as pay and will be liable for NI and Tax.
One routine health screening and one medical examination per year are allowable, which are both Tax and NI free to the employee. If there are any treatments that are needed afterwards, these are treated as pay.
So to clarify, if you are a director or employee of a company:
Ask your company to pay the health care policy and save you 12% NI by including it in your P111D.
Claim one free health care screening per year tax and NI free
Claim one free medical examination per year tax and NI free (but treatment is not included)
Claim for work specific eyewear (and apportion usage if necessary)
If you are working overseas, ask the company to pay for medical insurance and/or medical treatment you need - both are tax and NI free to you.
The company can save corporation tax on all of the above items, but employers NI is payable.