Tax on Medical Insurance (Benefit in Kind)

Billy_Keith

Hi

I receive medical insurance via my employers and understand that I am taxed on this as a benefit in kind however, please can anyone advise whether I should just be taxed at the normal rate (I am a basic rate tax payer).  At the moment the whole amount is deducted from my personal allowance.

Many thanks

Dazed_and_C0nfused

Billy_Keith said:

Hi

I receive medical insurance via my employers and understand that I am taxed on this as a benefit in kind however, please can anyone advise whether I should just be taxed at the normal rate (I am a basic rate tax payer).  At the moment the whole amount is deducted from my personal allowance.

Many thanks

You are taxed at whatever your marginal rate is, this might be 20% but if you are close to the higher rate threshold then it might be part taxed at 20% and part at 40%.

TadleyBaggie

Sounds correct. 

BoGoF

Billy_Keith said:

As the whole amount of the cost of the insurance £1114 is deducted from my personal allowance it is leaving me with a tax code this year of 1145L.  I would have thought that I would only be taxed 20% the cost of the insurance around £222 per annum.  Does deducting the full amount from my personal allowance give the same outcome?

Yes, same result as adding £1114 to your income.

BoGoF

From April 2026 it will be mandatory for employers to payroll benefits. This means no restriction in tax code and the benefit value being added to your payslip.

Billy_Keith

TadleyBaggie said:

Sounds correct. 

Thanks however - As the whole amount of the cost of the insurance £1114 is deducted from my personal allowance it is leaving me with a tax code this year of 1145L.  I would have thought that I would only be taxed 20% the cost of the insurance around £222 per annum.  Does deducting the full amount from my personal allowance give the same outcome?

BoGoF

Billy_Keith said:

TadleyBaggie said:

Sounds correct. 

Thanks however - As the whole amount of the cost of the insurance £1114 is deducted from my personal allowance it is leaving me with a tax code this year of 1145L.  I would have thought that I would only be taxed 20% the cost of the insurance around £222 per annum.  Does deducting the full amount from my personal allowance give the same outcome?

As an example of someone earning £30,000 and having a £1,114 BIK. Total taxable income £31,114 minus personal allowance £12,570 = £18,544 @ 20%. Same result taxing £30,000 on a code of 1145L - leaves  £18,544 @ 20%

[Deleted User]

Billy_Keith said:

TadleyBaggie said:

Sounds correct. 

Thanks however - As the whole amount of the cost of the insurance £1114 is deducted from my personal allowance it is leaving me with a tax code this year of 1145L.  I would have thought that I would only be taxed 20% the cost of the insurance around £222 per annum.  Does deducting the full amount from my personal allowance give the same outcome?

Your personal allowance has been reduced by £1114. 

This means that £1114 MORE of your income will be taxed at 20%. 

That equates to £222.80. 

xylophone

Relative (retired with DB pension and higher rate tax payer) has private health insurance with DB pension.

It is treated as though it were part of the pension and accordingly taxed as income.