Definition
An employer-provided benefit that gives employees access to private healthcare, covering consultations, diagnostics, and treatment outside the NHS. PMI policies vary in coverage, from basic plans covering core treatments to comprehensive plans including dental and optical care.
UK Context
Private medical insurance provided by an employer is a taxable benefit in kind. The employee pays income tax on the value of the benefit, and the employer pays Class 1A NICs. The benefit value must be reported on a P11D form. PMI is one of the most valued employee benefits in the UK and is often offered as part of a flexible benefits package.
Best Practices
- Report the full cost of PMI cover on each employee's P11D and pay Class 1A NIC
- Review policy terms annually to ensure cover remains competitive and cost-effective
- Consider offering PMI through salary sacrifice or flexible benefits to manage tax liability
Frequently Asked Questions
Is private medical insurance taxable?
Yes, employer-provided PMI is a taxable benefit in kind. The employee pays income tax on the premium value, and the employer pays Class 1A NICs at 15%. The benefit is reported on the employee's P11D.
Can PMI be offered through salary sacrifice?
Yes, employers can offer PMI through a salary sacrifice arrangement. This reduces the employee's gross pay and therefore their income tax and NIC liability, though the employer still pays Class 1A NIC on the benefit value.