Let’s first establish what a P11D is, and how to calculate tax on benefits received.
P11D is a document used in the UK to report benefits in kind (BIK) provided to employees and Directors.
⦁ These benefits are non-cash perks that are received but not included in their salary.
Common Benefits
⦁ Private medical insurance
⦁ Company cars
⦁ Interest free loans
⦁ Subsidized or free travel
⦁ Entertainment expenses
⦁ Assets provided to an employee that have significant personal use
Employers Responsibility
Collect the relevant benefit and cost information, calculate the taxable value, and use the applicable P11D or registered payrolling route. Employer Class 1A NIC and P11D(b) obligations must also be checked.
Employees Responsibility
⦁ Check the Information: Employees should check the information on their P11D to ensure it is accurate.
⦁ Pay Tax: Pay any additional tax due on the benefits through their tax code adjustment or via a self-assessment if they are required to file a tax return
Example benefit – PMI
⦁ The cost of this is £1200pa
⦁ Your employer reports this £1,200 on your P11D form
⦁ HMRC uses this information to adjust your tax code, meaning they may take a bit more tax from your salary to cover this extra benefit
So Employees do get taxed on receiving company health insurance, however the cost to them is significantly lower than if they paid for the policy privately. You also likely benefit from some economies of scale from group cover, you may also get better underwriting terms. Reason for Insurers looking for fondly towards group scheme underwriting comes down to how they assess the performance of a scheme – Loss ratio. With individual cover, the risk is pretty high to the insurer – even a single claim in any given policy year could cost them more than the premium collected. Individual cover as a result is normally calculated based on NCD – no claims discount. For company health insurance it’s usually based on total cost of claims vs premium paid (loss ratio).
How much would the employee pay towards your health insurance?
For a £1,200 taxable PMI benefit, tax would be £240 at a 20% marginal rate, £480 at 40%, or £540 at 45%. These are illustrations, not universal salary bands. The £37,700 basic-rate band is a taxable-income band, not a gross-salary threshold. Personal allowances, other income and UK nation affect the result; Scotland has different rates and bands for employment income.
How much would the Employer Pay?
For 2026/27 the employer Class 1A NIC rate is 15%. A £1,200 taxable benefit therefore produces £180 Class 1A NIC. The premium plus this NIC costs £1,380 before any corporation-tax relief. If both costs qualify for deduction and a 25% corporation-tax rate applies, illustrative relief is £345 and net cost £1,035. Actual relief depends on the company’s circumstances and applicable tax rules; ask your accountant.
Class 1a National Insurance
⦁ Employers also have to pay an extra tax (called class 1A NI) on most of these benefits.
⦁ They calculate this tax based on the value of the benefits and report it using another form called the P11D(b).
Summary
⦁ P11D Form: Tells HMRC about extra benefits you get from your job
⦁ Why it Matters: Ensures you pay the right amount of tax on these benefits.
⦁ What You Do: Check the form your employer gives you and make sure it’s correct.
⦁ Employees pay a benefit in kind tax on receiving Health Insurance, but the contributions is significantly less than the cost of private cover.
⦁ Employers do pay contributions through National Insurance, and the cost of the policy – however some of these costs are deductible against corporation tax.
