Medical Insurance
Step 1: Ascertain whether benefit employer wishes to provide is exempt or not.
Which benefits are exempt? Click here for answer
Step2: If benefits are not exempt, we need to report them to HMRC and deduct tax and NIC but it depends on who pays for the benefit.
| Who Pays | Who pays What |
| Employer arranges and pay directly to insurance company | Employer Class 1A NIC via P11d Employee – income tax via Self-assessment but pays no NIC. |
| Employee arranges but employer pays to insurance company | Employer Class 1A via P11d Employee – income tax via Self-assessment Employee pays NIC via payroll by adding value of benefit to employee’s earning. |
| Employer reimburses employee | Employer pays Class1A and employee pay Class1 NIC and Tax. All collected via payroll. |
Conclusion: Best option is employer to arrange and pay provider directly. Please note cost of insurance and class 1A NIC will be tax deductible for employer as an expense.
Source:
Expenses and benefits: medical or dental treatment and insurance – GOV.UK (www.gov.uk)
Life Cover
No liability to income tax arises if the employer arranges and pays for a `retirement or death benefit`.
Retirement or death benefit – means a pension, annuity, lump sum, gratuity or other similar benefit which will be paid in the event of the employee’s retirement or death.
Source
Section 307 ITEPA 2003
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