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Private Medical Insurance in the UK

When hiring staff in the UK, overseas employers often ask whether private medical insurance is required or expected. This page provides a clear explanation of how healthcare works in the UK, when private medical insurance is typically offered, and what the tax implications are for both the employer and employee.

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Access to the National Health Service (NHS)

All employees working legally in the UK with a valid National Insurance number are eligible to access the National Health Service (NHS). The NHS provides comprehensive medical care, free at the point of use, including:

  • Registration with a General Practitioner (GP) as the first point of contact for healthcare
  • Emergency treatment via accident and emergency (A&E) units or ambulance services
  • Hospital care, maternity care, and mental health services


There are no additional costs for treatment on the NHS, regardless of the length or complexity of the care provided.

Employees may already be familiar with this if they have previously worked in the UK or have UK contacts.

Why Offer Private Medical Insurance?

Although the NHS offers comprehensive care, there can be long waiting times, especially for non-emergency treatment or specialist referrals. To improve access and reduce waiting periods, some UK employers choose to offer private medical insurance (PMI) as part of their benefits package.

Private medical insurance can cover:

  • Faster access to specialists and diagnostics
  • Private hospital rooms
  • Extended support such as physiotherapy or mental health counselling
  • Additional health screenings or wellness programmes

Offering PMI can help attract and retain top talent, especially when recruiting experienced professionals or offering a competitive benefits package.

Two Common Approaches for Providing PMI

1. Cash Allowance for Private Medical Insurance

  • The employer pays an additional amount of salary each month, intended to allow the employee to purchase their own private medical insurance.
  • The employee chooses their own provider and level of cover.
  • For payroll purposes, this is simply additional gross salary and is taxed and subject to national insurance like any other pay element.
  • You can designate it on the payslip separately (e.g. “Medical Allowance”) and exclude it from pensionable earnings if preferred.


Advantages:

  • Simple to administer.
  • No need to manage group insurance policies.

Disadvantages:

  • The employee may choose not to take out insurance at all.
  • No employer control over the level or quality of cover.


2. Employer-Provided Private Medical Insurance

  • The employer takes out a group private medical policy and covers eligible employees.
  • The cost of the insurance premium per employee is treated as a taxable benefit-in-kind.
  • The value of the benefit is the annual premium paid for each employee.


Tax implications:

  • The employee pays income tax on the benefit (added to their taxable income).
  • The employer pays Class 1A National Insurance Contributions at 15% on the value of the benefit.
  • The employee does not pay National Insurance on the benefit.


Advantages:

  • Employer control over the provider, policy terms, and level of service.
  • Demonstrates a strong commitment to employee wellbeing.


Disadvantages:

  • More complex to administer.
  • Involves reporting via the annual P11D process.

Practical Considerations for Overseas Employers

  • PMI is not a legal requirement in the UK.
  • It is not expected by all employees, though it is more common for senior hires or competitive industries (e.g. finance, consulting, tech).
  • The cost per employee will vary depending on age, provider, and level of cover, but as a rough guide, expect GBP 200 – GBP 1,000 per year.
  • You’ll need to speak to a UK-based insurance broker or provider such as BUPA, AXA, Aviva, or Vitality. This is a regulated sector, and your UK accountant or tax advisor cannot give specific insurance advice.

Summary

If the employer also pays for private fuel for a company car, a separate BiK charge applies. This is calculated using a fixed multiplier (£28,200 for 2025/26) × the car’s BiK percentage.

OptionTaxable Benefit?Subject to Employer NIC?Admin ComplexityControl Over Cover
Medical Insurance AllowanceYesYesLowLow
Employer-Provided PMIYesYes (15%)MediumHigh

FAQs

No, it’s not legally required. All employees legally working in the UK can access the NHS, which is free at the point of use. However, some employers offer private medical insurance as a benefit to attract and retain staff.
The NHS provides comprehensive care without charge, but often involves long waiting times. Private medical insurance gives faster access to treatment and private hospital services.
Yes. Many employers simply pay a monthly allowance as part of the employee’s salary. The employee then chooses their own provider. This allowance is taxed as normal salary.
If the employer pays for the policy, the value of the premiums is a taxable benefit in kind for the employee. The employer must report it and pay Class 1A National Insurance on the value.
Yes. The employee pays income tax (but not National Insurance) on the cash equivalent of the insurance premiums, usually via an adjustment to their tax code.
Common providers include BUPA, AXA Health, Aviva, and Vitality. Each has a range of corporate and individual plans.
No. Insurance is a regulated activity. You must speak to a licensed broker or provider. However, your UK accountant can explain the tax and reporting implications.

Contact Our Experts

Would you like help reviewing your UK benefits offering?

We support overseas employers to ensure their remuneration packages are UK-compliant and tax-efficient.

Sarah English

Senior Manager

Head of Direct Taxes

sarah.english@tuerner.com
+44 (0) 1636 526 075

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