In modern day society, attracting and retaining the right people is about more than just salary. It’s about workplace culture, personal development opportunities and staff benefits. Private medical insurance (PMI) and critical illness cover are just two areas that show your team you really care. But before you take out a policy, it’s crucial that you understand the tax implications for both you and your staff.

Private medical insurance

PMI covers the cost of private healthcare for your employees, helping them to receive a quicker diagnosis and treatment and ultimately supporting them to return to work sooner if they fall ill. 

For employees, PMI is classed as a benefit in kind meaning that the value of the premium is added to their taxable income and reported on a P11D form. Put simply, it reduces their tax-free allowance and increases their tax bill slightly, but many find it a worthy investment.

For the company offering this option, the premium is treated as an allowable business expense reducing overall taxable profits! 

Critical illness cover

In this instance, a lump sum is paid to an employee if they’re diagnosed with a serious illness such as cancer or suffer from a medical emergency like a stroke or heart attack. Again, just like PMI, this is classed as a benefit in kind for employees meaning they pay additional tax on the premium amount.

Similarly, for employers, critical illness cover premiums are also tax-deductible. A positive for your bottom line. 

So, is it worth it?

In short, yes. While these benefits do mean that your staff have to pay some tax, the value outweighs it. After all, it could be argued that quick access to private healthcare and financial support during illness outweighs any price paid. And don’t forget your business benefits from tax relief too. 

What’s more, Kathryn Hargreaves from IN Accountancy reveals that “employers can register for Payrolling Benefits which can reduce the administrative burden of annual filing. This will be mandatory from April 2027.”

Thinking about offering PMI or critical illness cover? Let’s talk about structuring your benefits package to minimise tax and maximise value for everyone involved. Contact MOORE Health & Protection Ltd to get started. 

MOORE Health & Protection Ltd is an Appointed Representative of The Right Mortgage Ltd, which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales no. 15020771. Registered Address: 17 Eyam Road, Hazel Grove, Stockport SK7 6HP.