Tax Implications of Providing Private Healthcare: A Comprehensive Guide for Employers

06 September 2023

In the modern work landscape, employers are increasingly recognising the importance of employee well-being. One valuable way to support your employees’ health is offering private healthcare benefits. Not only does this demonstrate your commitment to their well-being, but it can also come with certain tax advantages. In this article, we’ll delve into the tax implications of providing private healthcare benefits to your employees.

Annual Health Screenings and Medical Check-ups: A Tax-Exempt Advantage

One of the prime benefits that employers can offer is annual health screenings and medical check-ups. Remarkably, these benefits are exempt from both tax and National Insurance (NI) contributions. This exemption holds true even if the advantage is selectively provided to specific employees. Health screenings are pivotal in identifying employees susceptible to health risks ensuring timely interventions. Medical check-ups involve comprehensive physical examinations by qualified healthcare professionals to assess an employee’s health status.

Recommended Medical Treatment: Tax-Free Assistance for Recovery

Employers can offer tax-free support up to £500 for recommended medical treatment, ensuring employee well-being. However, certain conditions must be met for this exemption to apply:

  • The recommended medical treatment should be formally prescribed in writing by a registered healthcare professional directed to the employee and employer.
  • The employee should have been absent from work due to illness or injury for a continuous period of at least 28 days or assessed as unfit for work for a 28-day span by a healthcare professional.
  • The recommendation should be an integral part of the occupational health services provided by the employer, highlighting the employee’s well-being as a priority.

Private Medical Insurance: A Tax-Deductible and Taxable Benefit

An alternative approach to offering private healthcare benefits is through private medical insurance. For employers, the cost of such insurance is tax-deductible, representing a financially sensible decision. However, employees must know that this benefit is regarded as a Benefit in Kind and is subject to taxation. The extent of taxation depends on the employee’s income tax band. It attracts a tax rate of 20% if falling within the basic rate tax band and 40% within the higher rate tax band.

Prioritising your employees’ health and well-being can go a long way in fostering a positive work environment and enhancing productivity. Offering private healthcare benefits is a strategic move that not only aids in attracting and retaining top talent but also displays your commitment to their holistic development. Remember to consult with professionals to ensure you adhere to the latest tax regulations and maximise the benefits for your employees and your business’s bottom line. 

We help our clients identify tax implications and benefits. To arrange a meeting today, please get in touch with us at 01633 871122.

Jenny Sharma FCCA CTA,Senior Tax Manager
Tax Implications of Providing Private Healthcare

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