Common expenses and benefits: tax, NICs and reporting requirements

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Medical insurance and treatment

Medical insurance and treatment

This guide explains what your tax and National Insurance contributions (NICs) obligations are if you pay for an employee’s medical insurance or medical treatment. It sets out which forms you should use to report these benefits to us, and tells you what tax and NICs you’ll have to work out and pay to us.

On this page:

What counts as a medical expense or benefit?
Work out the value to report
Where to report and what tax/NICs to pay

What counts as a medical expense or benefit?

If you bear the cost of medical or dental treatment or insurance premiums for your employees (or their family members) then you’ll have to report it to us and you may have to pay tax and NICs to us as well.

The specific requirements differ depending on the way you provide medical benefits to your employees – this is explained in the section ‘Where to report and what tax/NICs to pay’.

Note that there are some exemptions. You don’t need to worry about reporting – or paying tax or NICs to us – for the following types of medical provision:

treatment outside the UK where the need for medical attention arises while an employee is working for you overseas
periodic medical checks for your employees
eye tests for employees who are required to use a computer screen or other VDU
spectacles or contact lenses that are used solely for an employee’s VDU work and that are shown to be necessary for such work by an eyesight test

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Work out the value to report

The general rule is to report the cost to you of providing the medical benefit. You should deduct from this figure any amounts that the employee may have paid to you towards the cost of the benefit.

If you have a group medical insurance policy with a single premium covering multiple employees, the value to report for each employee must be an appropriate proportion of the overall figure.

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Where to report and what tax/NICs to pay

The forms you’ll need to use and the tax or NICs you may need to pay to us differ depending on the way you provide medical benefits, as explained below.

The quickest way to complete the forms mentioned below is to use our free ‘Online Return and Forms’ service, the interactive forms on our Employer CD-Rom, or a commercial payroll software package.

You arrange medical treatment or insurance and pay the provider directly

You must pay us Class 1A NICs on the value of the benefit at the end of the tax year if it is provided to a company director or an employee earning at a rate of £8,500 or more per year. You must also record the value in Section I of form P11D for these employees.

There is no need to pay us anything or record the value on any forms if you provide the benefit to an employee earning at a rate of less than £8,500.

The employee arranges treatment or insurance but you pay the provider directly

You must pay us Class 1 NICs, irrespective of the employee’s earnings. Add the value of the benefit to gross pay when recording and calculating Class 1 NICs (but not PAYE (Pay As You Earn) tax) through your payroll using form P11.

No Class 1A NICs are due. But you must also record the value of the benefit in section B of form P11D for company directors and for employees earning at a rate of £8,500 or more per year, or in section A(2) of form P9D for those earning at a rate of less than £8,500.

The employee arranges treatment or insurance and you reimburse their costs

This counts as providing extra pay to your employee, so you must pay us PAYE tax and Class 1 NICs on the value of the benefit. Add the value to the employee’s gross pay when recording and calculating PAYE tax and Class 1 NICs through your payroll using form P11.

No Class 1A NICs are due, and the benefit doesn’t need to be recorded on forms P11D (for directors and for employees earning at a rate of £8,500 or more per year) or P9D (for employees earning at less than that).

Any other arrangement

If you provide medical treatment or insurance to an employee in any other way, contact our Employer Helpline on Tel 08457 143 143 and we will tell you what you need to do. The helpline is open from 8.00 am to 8.00 pm Monday to Friday, and 8.00 am to 5.00 pm on Saturday and Sunday.

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