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What Is A Benefit In Kind Health Insurance?

George Blandford

May 12, 2024

A Benefit in Kind, or BIK for short, is when your employer provides you with some kind of non-cash benefit as part of your compensation package.

One very common example is when companies offer private health insurance to their employees. This type of health coverage allows you to get medical treatment faster than relying only on the NHS. Many UK employers see providing BIK health insurance as an excellent way to attract and keep great employees.

So, a BIK health insurance policy is private medical cover paid for fully or partially by your employer instead of cash. It can be an extremely valuable employment benefit that gives you and your family better access to private healthcare services.

Now that we’ve covered the basics, let’s dive deeper into how exactly this BIK health insurance thing works and why it matters for you.

Key Takeaways

  • A Benefit in Kind (BIK) is a taxable non-cash benefit that your employer provides, like private health insurance coverage.
  • With a BIK health plan, the employer pays some or all of the insurance costs to give employees faster access to private medical treatment.
  • Employees may have to pay some income tax on the value of the BIK insurance, but the employer usually covers this tax directly.

What Is a Benefit in Kind Health Insurance?

Understanding Health Insurance as a Special Perk

When your employer provides you with private medical insurance, this counts as a Benefit in Kind. It’s considered a special extra benefit on top of your regular pay. Typical BIK health insurance plans cover things like:

  • Seeing a private doctor or specialist without long waiting times
  • Private hospital treatment and surgeries
  • Diagnostic tests like MRI scans or X-rays
  • Therapy services such as physiotherapy

This private health coverage is different from the NHS, which everyone can use. The NHS is a public service, while BIK insurance is a private scheme paid for by your employer.

Differences from Regular Health Insurance

Unlike regular private health insurance policies that individuals buy themselves, BIK plans have some unique features:

  • Your employer selects the coverage levels and insurance provider
  • The company usually pays the full insurance premium or at least a portion of it
  • You may not have to go through medical underwriting to join the employer’s group plan

So, in essence, it acts more like an automatic health benefit than an individual insurance product you sign up for.

What You Need to Know About Taxes and This Insurance

Taxes on Health Insurance Benefits

When your employer provides you with private health insurance as a Benefit in Kind, there are some tax rules you need to know. The government considers this a taxable benefit – which means you may have to pay some income tax on it.

However, the good news is that your employer will likely cover or subsidise this tax cost for you. Most companies pay the tax on your BIK insurance directly through their own payroll taxes.

How to Figure Out Your Taxes with This Insurance

To calculate how much tax you might pay, there’s a simple formula:

Your personal taxable rate x the cost of the insurance premium = The tax you owe

For example, if you’re a basic rate taxpayer (20%) and your employer pays £1,000 per year for your BIK health plan, you would owe £200 in taxes (20% of £1,000).

But again, your employer will usually pay this tax amount directly through their payroll system. You don’t have to worry about filing anything extra.

What You and Your Employer Must Do

As an employee, there’s not much you need to do regarding taxes on your BIK health insurance. Your employer handles most of it through their payroll process.

However, your employer does have some responsibilities:

  • They must calculate the taxable value of your insurance plan
  • They need to report this BIK amount to HMRC each tax year and ensure that the appropriate National Insurance contributions are accounted for as necessary
  • They pay the tax owed on your BIK benefit directly to HMRC

Your employer will likely have an internal process to ensure they follow all the tax rules properly for BIK benefits like health insurance, which includes submitting Form P11D to HMRC annually to report the value of such benefits.. As an employee, you simply enjoy this extra insurance perk from your job!

The only thing you may need to do is keep proof of your BIK insurance in case you’re asked about it when filing your personal tax return.

Choosing the Right Benefit in Kind Health Insurance

Making Smart Choices

Not all employer health insurance plans are created equal. When your company offers BIK medical coverage, you’ll want to carefully review what’s included to make sure it fits your needs.

Some key things to consider are:

  • The treatments and services covered by the plan
  • Any exclusions or limits on coverage
  • The network of approved doctors and hospitals
  • If your family members like spouse/children are also included

You’ll also want to weigh this BIK health benefit against other perks your company offers. Does private insurance make more sense for you than other options like a higher salary?

How to Talk About Benefits with Your Boss

Don’t be afraid to discuss your employee benefits package with your manager or HR department. After all, these BIK perks are a valuable part of your total compensation from the company.

You can ask questions like:

  • “Can you explain more about what treatments and services are covered under the health insurance plan?”
  • “How do the costs of this BIK insurance compare to getting a salary increase instead?”
  • “Is it possible to adjust my benefits if the current plan doesn’t fit my family’s needs well?”

Having open conversations shows you’re making educated decisions about your healthcare coverage and employment. Your employer should be happy to clarify any confusing details.

It’s also okay to respectfully negotiate for better benefits during job interviews or annual reviews.

The key is to approach it professionally and emphasise that comprehensive benefits will help attract and retain a productive, healthy workforce.

What Can You Do Next?

Now that you understand more about how Benefit in Kind health insurance works, it’s time to take action! Don’t just settle for whatever policy your employer provides.

Make sure you have the right private medical coverage to fit your family’s specific needs and situation. An insurance professional can help you evaluate your current benefits to see if they are comprehensive enough.

For example, you may want a plan that includes coverage for alternative therapies, mental health services, or a broader network of private hospitals to choose from. Or maybe you need specialised cover for conditions like cancer or diabetes.

The best way to ensure you have the right protection is to get a personalised insurance quote tailored just for you. Speak to an advisor who can explain all your options in plain language. They’ll take into account your age, health status, dependent family members and other factors.

From there, you can make an informed decision about keeping your employer’s BIK plan, enhancing it with additional private cover, or finding an entirely separate private health policy. The key is understanding all your choices to pick the right medical insurance fit.

FAQs

What are some examples of benefits in kind?

Common benefits in kind that employers may provide include private medical insurance, company cars, gym memberships, and childcare vouchers. Essentially, any non-cash benefit you receive from your job counts.

Is a benefit in kind health insurance worth it?

Yes, private health insurance as a benefit in kind can be extremely valuable. It allows you to access medical treatment faster than relying only on the NHS. This perk can provide peace of mind and better healthcare for you and your family.

How does a benefit in kind affect my salary?

A BIK is a non-cash benefit in addition to your regular salary. However, you may have to pay some income tax on the value of the benefit. Your employer usually pays this tax cost directly through their payroll.

Can I get health insurance through my business?

Yes, if you own a business you can provide private health insurance as a benefit in kind for yourself and any employees. This can help attract talented staff. Just be aware of the tax rules around reporting BIKs.

How do I calculate the tax on a benefit in kind health insurance?

The tax is calculated based on the insurance premium cost paid by your employer and your personal income tax rate. For example, if you’re a basic rate taxpayer and your employer pays £1,000 per year for your medical insurance, you would owe around £200 in taxes.

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