Can My Limited Company Pay for My Private Health Insurance?
A clear look at how company-funded private health insurance works for directors, their families and growing limited companies.
Louis has over 12 years' experience advising company directors and limited companies on private medical insurance.
If you run your own limited company, you do not necessarily have to pay for private health insurance from your personal bank account. Your limited company can pay for private health insurance for you as a director.
The more important question is usually not "can it be paid for" but "how should it be arranged". Cover can be set up as an individual policy funded by the company, or as part of a business health insurance scheme, depending on who needs cover, whether you want to include family, the size of your company and any plans to cover employees in future.
At Elective Health, we help directors compare appropriate private health insurance cover from leading UK insurers, and explain how each route works before you decide.
How Can a Limited Company Pay for Private Health Insurance?
Broadly speaking, there are two routes a limited company can take when funding private health insurance for a director.
An Individual Health Insurance Policy Paid For by the Company
This route can suit owner-managed businesses that want to cover one or more directors, rather than setting up a full employee scheme. Family members may be available to include, depending on the insurer's terms.
It's worth remembering that who pays for a policy is a separate question from what type of policy it is. Simply paying the premium from a company bank account does not automatically turn an individual policy into a business scheme.
A Business Health Insurance Scheme
This route can suit companies that want to cover employees as well as directors, or that expect the business to grow. Business schemes often have different eligibility rules and underwriting options compared with an individual policy.
You can read more in our Business Health Insurance guide for a fuller explanation of how these schemes work.
What If I Am the Only Director of My Company?
Being the sole director of your company does not prevent your limited company from paying for your private health insurance. This is a common situation for consultants, contractors and owner-managed limited companies.
How the arrangement works in practice depends on the insurer, your specific cover needs, and whether an individual policy or a business policy is the more suitable option for your circumstances. Because this varies between providers, comparing the appropriate available insurers is an important part of getting it right from the outset.
Can My Limited Company Pay for My Family's Private Health Insurance?
In many cases, a spouse, partner or children can be included on company-funded cover, depending on how the policy is structured and the individual insurer's rules. However, including family members can affect the tax and National Insurance position, so this is not a decision to make without proper advice.
HMRC's guidance confirms that an employee is generally taxable where an employer contributes towards medical insurance covering the employee or a member of their family or household (see HMRC EIM21762). Separately, HMRC's National Insurance guidance distinguishes between a workforce policy the employer contracts for, which attracts Class 1A National Insurance, and a situation where an employee extends employer-arranged cover to family members and the employer pays the extra premium, where the family-related amount is instead treated as Class 1 earnings (see HMRC NIM02230).
Because these rules depend on exactly how cover is arranged, we recommend directors speak to their accountant before adding family members to a company-funded policy.
Is Company-Paid Private Health Insurance a Benefit in Kind?
Generally, yes. Employer-provided private medical insurance is normally treated as a taxable Benefit in Kind unless a specific exemption applies. Where the employer arranges and pays for the policy directly, this typically means the benefit needs to be reported and Class 1A National Insurance generally applies (see GOV.UK: Expenses and benefits, medical treatment and insurance).
It should not be thought of as a way to receive tax-free private healthcare. The tax position is a genuine cost that needs to be weighed up alongside the overall value and premium of the cover, not treated as an afterthought.
Elective Health advises on the insurance arrangement itself, not on individual tax treatment. For guidance on how company-funded cover applies to your specific circumstances, please speak to your accountant or tax adviser.
Does It Go on a P11D?
This depends on how the cover is arranged and whether the benefit has been registered for payrolling. Non-exempt, employer-arranged medical insurance is normally reported on a P11D. Where a benefit has instead been registered as a payrolled benefit, it is handled differently through payroll, though Class 1A National Insurance obligations can still apply (see GOV.UK: what to report and pay and GOV.UK: payrolling benefits guidance).
We would always recommend confirming the correct treatment with your accountant or payroll provider. Elective Health arranges the insurance itself, we do not provide tax advice.
Individual Policy or Business Health Insurance: Which Is Better?
Neither option is automatically better. An individual company-funded policy may well suit a director on their own, or with immediate family included.
Where the company qualifies for an SME health insurance scheme, SME rates are typically more competitive than comparable personal policy pricing. That said, actual premiums depend on the insurer, the members being covered, the level of cover chosen and the underwriting terms available, so it's worth comparing options for your company's specific circumstances.
What's important to understand is that employees cannot simply be added later to an individual director's policy as though it were a group scheme. If the company wants to offer cover to employees in future, a separate business health insurance arrangement is usually required. It's worth thinking about growth before you set up your initial cover, rather than after.
What Can Company Director Health Insurance Cover?
- Private specialist consultations
- Diagnostic tests and scans
- Private hospital treatment
- Surgery and inpatient treatment
- Cancer treatment
- Therapies
- Mental health cover
- Digital GP services
Exactly what's included varies from policy to policy. Hospital access, outpatient limits, excess levels and whether you have a guided or open choice of consultant all affect both the premium and the flexibility of the cover, which is why comparing policies properly matters.
Can Two Directors Be Covered?
Potentially, yes. This can apply to husband-and-wife directors, or to unrelated business partners who both hold director positions. Whether an individual arrangement for each director, or a business scheme covering both, is more suitable depends on your circumstances and each insurer's eligibility rules.
Elective Health can compare the available insurance options for two-director companies so you can see how each route compares in practice.
What Happens If My Company Grows?
A company that starts out with one director could grow to five, ten or more people within a few years. If that happens, a business health insurance scheme may become more appropriate for eligible employees, and can offer underwriting options that simply aren't available to an individual policyholder on their own, such as Medical History Disregarded underwriting.
Thinking about this possibility early on can save a lot of complication further down the line.
Should I Pay Personally or Through My Limited Company?
There is no single answer that applies to every director. It genuinely depends on your circumstances, so it helps to work through a short checklist before deciding.
- Who needs cover?
- Do you want to include family cover?
- Do you currently employ anyone?
- Are you likely to employ people later?
- What level of cover do you need?
- What premium are you comfortable with?
- What are the tax implications?
- What underwriting options are available to you?
- Do you have existing insurance that needs switching?
If you already have a personal policy and are considering moving to company-funded cover, it's worth looking at switching health insurance carefully before cancelling anything.
The insurance question and the tax question should really be considered together, not separately. Elective Health advises on the insurance side, comparing suitable cover for your company. Your accountant or tax adviser is best placed to advise on how it should be treated for your individual tax position.
Speak to Elective Health
Elective Health can compare suitable options and talk you through the differences between an individual policy and a business scheme, based on your company's circumstances today and your plans for the future.
For a fuller breakdown of cover options, underwriting and cost for directors, read our dedicated guide to Private Health Insurance for Company Directors & Limited Companies.
Whether you are a sole director, part of a two-director company, or planning to grow your team, our guide to Company Director Health Insurance covers the routes available to you in more detail.
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