UHY Ross Brooke Chartered Accountants

Can I pay for health insurance through my company?

tax NIC and health insurance

Newbury accountant

Is a question I am asked fairly regularly, and my answer is that you can, but generally for tax reasons I wouldn’t recommend it.

By Chris Davies

Admittedly health insurance contributions will be a corporation tax deductible expense for the company saving tax at 19%, 25% or 26.5%, but depending on their own income the individual will pay personal tax on the benefit in kind at 20%, 40% or 45%.

But the real kicker that gets overlooked is the class 1a NIC that the company has to pay on the benefit at 13.8%. Added to that, if a benefit in kind needs reporting then most likely you will need to pay someone to produce that form.

I have reproduced below a table of calculations using an annual contribution of £1,000 various tax rates.

Corporation tax rate 19%19%25%25%
Income tax rate  20%40%20%40%
Cost of P11db preparation £125£125£125£125

If premiums are paid by the company

££££
Cost of health insurance 1000100010001000
P11d  A125125125125
Employers NIC at 13.8%B138138138138
    1263126312631263
Corporation tax reliefC240240316316
Personal tax liability of individualon benefit in kind D200400200400
TOTAL TAX, NI P11Db costs        A+B-C+D223423147347

If premiums are paid by the individual

    
Dividend tax on dividend drawn to pay premium8833888338

Saving if paid by the individual

136866010

So in conclusion, in this example in all cases it is more tax efficient for the individual to pay for the health insurance rather than the company, and this is particularly evident where the company’s profits and individuals income is on the lower end of the spectrum.

Of course tax rates can and do change and its important to keep the calculations under review. A change in Government may see these calculations turned on their head.

Do get in touch if you would like more advice.

Share This Post

Related insights

Talk to us

Newbury: 01635 555666
Abingdon: 01235 251252
Swindon: 01793 610008
Hungerford: 01488 682546