Change to private healthcare benefit - should I inform HMRC or will tax-free amount change itself? 8 September 2022 at 11:04AM in Cutting tax 7 replies 201 views

Da_Crojanz

I had a taxable benefit of private health insurance from work at a total cost of around £1800, covering myself and my wife. Tax on this was paid via the £1800 being removed from my tax-free amount and a change in tax code being issued.

My wife's new job has just given her a similar healthcare scheme and told her not to "double up" by still being on my scheme as it means I'll pay more tax. I got her removed from the cover, which will reduce the cost of the cover and thus should result in a change in tax-free amount.

Do I need to inform HMRC of this or will the change happen on its own? I expect Payroll Dept will take it into account when calculating my next payslip but I'm not sure if I need to do anything.

tasticz

Generally, once the benefit is reduced, it should automatically be re-calculated by your payroll department for PAYE purposes but in your case you'll need to reduce the benefit by speaking with HMRC or from online tax account. 

just on a side note, please make sure your wife's new policy will cover her existing condition (I can't remember what they call it non-underwritten or something so existing conditions are covered without any issue).

Da_Crojanz

Thanks - I don't really understand this. The Payroll dept should take the tax off as PAYE and the change to the policy should mean that a different amount automatically comes off. What is it I'm telling HMRC and what info do I need to provide to them?

nyermen

I do self assessment, so its different as I declare the P11D at the end of the year and pay any delta then.

BUT - when in the middle of a year the value changed I got a recoding message from them as they were alerted by my company that the health benefit value had been adjusted.

Dazed_and_C0nfused

Da_Crojanz said:

Thanks - I don't really understand this. The Payroll dept should take the tax off as PAYE and the change to the policy should mean that a different amount automatically comes off. What is it I'm telling HMRC and what info do I need to provide to them?

Medical benefit is notoriously tricky.

Just because you stop received the benefit now, say 5/12ths of the way through the tax year, doesn't mean the benefit will only be 5/12ths of the annual amount.

Your employer may have paid the whole premium earlier in the year meaning there is no reduction in the taxable amount by stopping it now.

You need to establish the correct position with your employer before contacting His Majesty's Revenue & Customs.

Da_Crojanz

Thanks for all the replies.

I got a letter through confirming the premiums were monthly and they will now be pretty much halved.

These premiums have been paid by reducing my tax free amount in the past. Will this adjust automatically or do I have to inform HMRC? I'd have thought that Payroll would process the new amount - I've not previously had to do anything manually on this even though the premiums change each year.

Dazed_and_C0nfused

If they were reported on a P11D then you will see the change (to 2022:23 onwards) when your 2022:23 P11D is submitted to HMRC by your employer, next Spring/early Summer.

JCS1

Da_Crojanz said:

Thanks for all the replies.

I got a letter through confirming the premiums were monthly and they will now be pretty much halved.

These premiums have been paid by reducing my tax free amount in the past. Will this adjust automatically or do I have to inform HMRC? I'd have thought that Payroll would process the new amount - I've not previously had to do anything manually on this even though the premiums change each year.

Your payroll department are only able to change a tax code if they are notified by HMRC to do so, the company cannot adjust it.