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Private healthcare insurance: Can I put it through my limited company?

If you are thinking about getting private healthcare insurance for yourself and your family, you can pay for it in two ways. You can either pay for your private healthcare insurance through your limited company or do it from your personal accounts. Depending on various factors, the tax efficiency of both methods will vary. Therefore, it’s always a good idea to get an opinion of an accountant to help you find the best option.

tax

To simplify the workings out of the final overall cost for private healthcare insurance, whether it’s through a limited company or personally, we are going to assume it’s at a price of £1000.

If you are paying for the medical insurance through your limited company it would be classed as a benefit in kind, so bear in mind that a P11d form needs to be filled as this may require admin costs. It will also mean that the company would have to pay Class 1a National Insurance at 13.8%. This would make an additional cost of £138. On the plus side, the company would be eligible for tax relief. This would mean that you can claim the relief of the healthcare insurance cost (£1,000), and the extra cost of national insurance (£138). The relief in total would, therefore, be 20% of £1,138, which is £227.60.

The P11d form that you would have filled out earlier will have to be declared on your personal tax return. That does also mean that it will attract personal tax at a marginal rate from your salary and dividends. This would be 20% of £1,000, making it £200. However, this also means that another £1,000 in dividends is pushed into the higher tax bracket, making it taxable at 22.5%. So, the total for this would be a £225 personal tax charge. Adding a total of £425 on top of the other costs.

If you were to take care of your medical insurance personally, then you would not get any corporation tax relief. You would also avoid being taxed for national insurance. Doing the insurance personally will make for an easier process. You still have to face some extra charges, and this is because you would be taxed on your dividends. The extra £1,000 would be shown as a grossed up £1,111, on your personal tax return. Therefore, you would be taxed at the rate of 22.5% making £249.98.

Here is a breakdown of all the calculations to show you the best way to pay for your private healthcare insurance.

Limited company Personally
Cost of Insurance £1,000.00 £1,000.00
Corporation Tax Saving £227.60 0
Personal Tax £425.00 £249.98
Class 1a National Insurance £138.00 0
Overall Cost £1,335.40 £1,249.98

Here, you can see that it would be more tax efficient to pay for the private healthcare insurance cover personally, rather than through your limited company. However, make sure to seek professional help of a limited company accountant who can give you a personalised summary and analysis to make a tailored decision specifically for you.

More on small business health insurance and accountants for limited company owners.

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