Yes — company-paid cover is a taxable benefit in kind. It is deductible for corporation tax and carries Class 1A National Insurance for the company.
How is directors' health insurance taxed (P11D)?
Company-paid PMI for a director is a P11D benefit-in-kind. The company pays the premium (Corporation Tax deductible), pays Class 1A NIC at 13.8% on the premium value, and reports the benefit on the director's P11D. The director pays income tax on the benefit at their marginal rate. HMRC EIM21860 covers the treatment.
Key numbers
- Class 1A NIC on BIK: 13.8%
- HMRC guidance: EIM21860
- Corp Tax relief on premium: 25% main rate
When to pay personally instead
(1) Higher-rate director + small company on 19% CT rate: personal purchase can be cheaper post-tax. (2) Director wants family cover: HMRC treats family premium as director's BIK too. (3) Very small company where you draw dividends not salary: BIK adds Class 1A NIC where none was due. (4) Cost of adviser complexity outweighs saving.
The mechanics, step by step
The company pays the premium and claims it as an allowable business expense, reducing taxable profit at 19% or 25% depending on the rate that applies. Because the director receives a personal benefit, HMRC treats the premium as a benefit in kind: the company reports it on form P11D by 6 July following the tax year, pays Class 1A National Insurance at 13.8% on the benefit value by 22 July, and the director pays income tax on the same value at their marginal rate through an adjusted tax code. HMRC's treatment sits in the Employment Income Manual at EIM21860.
A worked example on a £1,200 premium
Company route, higher-rate director, 25% corporation tax: the company saves £300 in corporation tax and pays £165.60 in Class 1A NIC, a net company cost of £1,065.60. The director pays £480 in income tax on the £1,200 benefit. Total combined cost £1,545.60. Personal route: £1,200 paid from post-tax income, but the director first had to extract that £1,200 — via dividends at 33.75%, the gross cost is roughly £1,811. On these numbers the company route still wins, but the margin narrows sharply for a basic-rate director and reverses in some dividend-only structures. Model it; do not assume.
The traps we see most
First, family cover: if the company pays for the director's spouse and children, the whole premium is the director's benefit in kind, which can double the tax charge unexpectedly. Second, forgetting Class 1A NIC entirely — it is the company's liability, not the director's, and it is the most commonly missed line. Third, payrolling: benefits can be payrolled in real time instead of reported on P11D, and from April 2026 payrolling of benefits becomes mandatory for most employers, so speak to your accountant about the transition. Fourth, mixing a personal policy through the company bank account without any P11D reporting — that is an error HMRC finds easily.
Group scheme versus individual director cover
Once you have two or more people to insure, a group scheme is usually cheaper per head than two individual policies and comes with medical history disregarded underwriting on many insurers, which is materially better than moratorium terms. The tax treatment is identical: allowable for the company, P11D benefit for each covered employee. Directors of a company with staff should almost always look at a scheme first.
What we do for director clients
We model both routes on your actual marginal rate and extraction method, quote the whole market on both an individual and a group basis, and give your accountant the premium breakdown they need for the P11D. No fee for the advice — we are paid by the insurer on placement.
Company-paid versus personally-paid director cover
| Element | Company pays | Director pays personally |
|---|---|---|
| Premium deductible for corporation tax | Yes, at 19% or 25% | No |
| Class 1A NIC at 13.8% | Yes, company liability | No |
| P11D reporting | Required (or payrolled) | Not required |
| Income tax for the director | Marginal rate on benefit value | None — paid from post-tax income |
| Cost of extracting the money first | Not applicable | Dividend or salary tax applies |
| Usually cheaper for | Salaried directors, larger premiums | Dividend-only or higher-rate edge cases |
Broker verdict
“We model both routes before recommending either. For dividend-heavy directors the 'always pay through the company' rule of thumb is simply wrong.” — , Head of Operations, PremierPMI
Related questions
Is directors' health insurance tax deductible?
The premium is an allowable expense for corporation tax, but it creates a P11D benefit in kind for the director and a Class 1A NIC charge for the company, so it is not tax-free.
Who pays the Class 1A National Insurance?
The company, at 13.8% of the benefit value, due by 22 July following the end of the tax year.
Can the company cover my family too?
Yes, but the entire family premium is treated as the director's benefit in kind, which increases the director's personal tax charge accordingly.
Do I need to file a P11D if I payroll the benefit?
No. Payrolled benefits are taxed in real time through payroll instead, and Class 1A NIC is still due. Payrolling becomes mandatory for most employers from April 2026.
PremierPMI is a UK private medical insurance broker specialising in whole-of-market placement across 10+ leading UK health insurers including Bupa, AXA Health, Aviva, Vitality, WPA, Freedom Health, The Exeter, General & Medical and National Friendly. FCA regulated (Tesha Family Ltd, FRN 1029667). Speak to a broker on 020 4525 0884, WhatsApp 020 8064 2273, or email contact@premierpmi.co.uk.
Ask a broker how your condition would be underwritten
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