When your employer pays for private medical insurance (PMI), the premium is treated as a benefit in kind. Unlike some other benefits, there is no exemption for PMI — the full annual premium (less any amount you contribute) is chargeable to income tax. This calculator shows the taxable benefit, the income tax you owe, the employer's Class 1A NIC, and a comparison with what the PMI would cost if you paid for it personally.
The rules are found in Part 3 Chapter 3 of ITEPA 2003. Employer-funded PMI has no statutory exemption in UK tax law. The taxable amount is the premium cost, not the value of any claims made. Group scheme premiums, family premiums, and individual premiums are all treated the same way.
PMI BIK Key Facts for 2025/26
- Taxable amount: annual premium paid by employer less employee contribution
- No employee National Insurance — BIK is income tax only
- Employer Class 1A NIC: 13.8% on chargeable benefit
- Report on form P11D — deadline 6 July after tax year
- Salary sacrifice for PMI: OpRA rules apply (no NIC saving since April 2017)
- Self-paying comparison: employer PMI costs employee their marginal tax rate × premium
PMI Benefit in Kind Calculator
Enter the annual premium your employer pays and any amount you contribute. The calculator shows your income tax, employer NIC, and the self-pay comparison.
Net cost to employee = income tax on benefit. If you paid for PMI personally from net salary, you would pay the full premium. Employer PMI therefore saves the employee the premium minus the tax charge.
Why PMI Is Always a Taxable BIK
Private medical insurance paid by an employer is a taxable benefit under UK tax law with no available exemption. Unlike some other benefits — such as a single mobile phone or an employer-provided bicycle — there is no statutory exemption for PMI regardless of the amount of the premium or the size of the employer's workforce.
The logic is that PMI gives an employee direct personal value (access to faster private healthcare) that is separate from their work obligations. HMRC therefore treats the employer's cost as taxable emoluments in kind. The value for tax purposes is the cost to the employer — not the value of any claims made during the year.
This means an employee who never uses their PMI still pays income tax on the full annual premium, while an employee who makes a £50,000 claim only pays tax on the premium. The premium cost is the measure, not the claims experience.
Self-Pay vs Employer PMI: The Real Comparison
Understanding the true cost comparison is important. If you pay for PMI yourself from net income:
- You pay the full premium from money already taxed at your marginal rate
- There is no BIK — no additional tax charge
- Total cost = full premium amount
If your employer pays the premium as a benefit:
- You receive the PMI without paying the premium directly
- You pay income tax on the benefit at your marginal rate
- For a basic rate taxpayer: effective cost = 20% × premium
- For a higher rate taxpayer: effective cost = 40% × premium
Example: £1,500 annual premium, basic rate taxpayer. Self-pay cost: £1,500. Employer PMI tax cost: £300. Net saving from employer provision: £1,200. Even after paying income tax on the benefit, employer-funded PMI is significantly cheaper than self-funding for most employees.
Salary Sacrifice and OpRA Rules
Before April 2017, employees could use salary sacrifice to fund PMI and save both income tax and National Insurance. Under the Optional Remuneration Arrangements (OpRA) rules introduced in the Finance Act 2017, salary sacrifice for PMI is now taxed on the higher of the cash given up or the benefit value.
In practice this means salary sacrifice for PMI generally produces no NIC saving. It may still provide cash flow advantages or administrative simplicity, but the tax position is largely the same as simply receiving the benefit without salary sacrifice.
Employees who entered salary sacrifice arrangements before April 2017 had transitional protection until April 2018 for most arrangements. All PMI salary sacrifice arrangements are now fully within the OpRA rules.
Group Schemes and Individual Policies
Most employer PMI is provided through group schemes where the employer negotiates a block rate for multiple employees. Whether the policy is a group scheme or an individual policy makes no difference to the BIK calculation — in both cases, the taxable value is the employer's cost (the premium allocated to the employee).
For group schemes, the cost per employee is typically apportioned by the insurer or employer. Where it is difficult to attribute a specific premium to each employee (for example, in composite group rates), HMRC accepts a reasonable allocation based on the employer's premium cost records.
| Policy type | Taxable benefit | Employee NIC | Employer Class 1A NIC |
|---|---|---|---|
| Individual PMI policy | Annual premium less contribution | None | 13.8% of benefit |
| Group scheme (employee only) | Allocated premium cost | None | 13.8% of benefit |
| Group scheme (family) | Full family premium allocated to employee | None | 13.8% of benefit |
Frequently Asked Questions
Is employer-paid private medical insurance always a taxable benefit?
Yes. Private medical insurance premiums paid by an employer are a taxable benefit in kind for the employee. There is no exemption for PMI in the UK tax system. The full premium cost (less any employee contribution) is chargeable to income tax.
Is there employee National Insurance on PMI benefits?
No. Benefits in kind are not subject to employee Class 1 National Insurance. Only the employer pays Class 1A NIC at 13.8% on the value of the benefit. Employees pay income tax on the benefit through PAYE or self-assessment.
What is the taxable amount for PMI benefit in kind?
The taxable amount is the annual premium paid by the employer less any contribution made by the employee. If the employee contributes part of the premium, only the employer's net contribution is taxable.
How does employer PMI compare to paying for it personally?
If you pay for PMI personally from net salary, you receive no tax benefit but there is no BIK. If your employer pays, you effectively get PMI at a cost of your income tax rate on the premium. For a basic rate taxpayer with a £1,200 premium, the net cost is £240 in extra tax — much cheaper than paying the full £1,200 personally.
Can PMI premiums be paid through a salary sacrifice arrangement?
Salary sacrifice for PMI lost its favourable tax treatment in 2017. Under Optional Remuneration Arrangements (OpRA) rules, the taxable benefit is the higher of the cash foregone or the benefit value. This means salary sacrifice no longer produces NIC savings on PMI for most employees.
What is the Class 1A NIC rate for 2025/26?
The employer Class 1A NIC rate is 13.8% for 2025/26. This is paid on the chargeable value of the PMI benefit and reported on form P11D(b) after the tax year.
Does family PMI coverage create a higher BIK than employee-only?
Yes. The taxable benefit is the full premium paid by the employer. A family policy that covers the employee, their partner, and children will have a higher premium and therefore a higher taxable benefit than an employee-only policy.
What happens if an employer pays premiums for an employee on long-term sick leave?
Normally, premiums paid for employees during sick leave remain taxable benefits in kind. Where the employer pays into a registered group insurance scheme specifically to provide income during incapacity, different rules may apply. Specialist advice is needed for these situations.
How is the PMI benefit reported?
Employers report PMI benefits on form P11D for each employee after the end of the tax year. The deadline is 6 July. Employees pay income tax through self-assessment or via a coding adjustment. Employers pay Class 1A NIC via form P11D(b) by 19 July.
Can employees opt out of employer PMI to avoid the BIK?
If the employer offers PMI as a flexible benefit and the employee can genuinely choose to opt out and receive alternative benefits or cash of equal value, the OpRA rules may apply. If the opt-out is genuine and the employee receives no cash alternative, opting out removes the BIK.
Is the employer's cost of PMI tax-deductible as a business expense?
Yes. The employer can generally deduct the cost of PMI premiums as an employment cost for corporation tax purposes, provided it is wholly and exclusively for the purposes of the business. The Class 1A NIC paid on the benefit is also deductible.
What if an employee makes a contribution towards the PMI premium?
The employee's contribution reduces the taxable benefit. If the employee pays £300 per year towards a £1,500 premium, the chargeable benefit is £1,200 (£1,500 − £300). The employee contribution must be a genuine payment to the employer, not just a salary reduction.