Private medical insurance tax calculator and guide
Updated 13 November 2026 · Tax year 2026/27
Scope: private medical insurance, dental insurance, health cash plans and medical treatment paid for by an employer, 2026/27. Part of the benefits in kind guide.
Private medical insurance (PMI) is one of the most common workplace perks in the UK. It is also one of the most common reasons for a tax code to fall. If your employer pays for health insurance, HMRC treats the cover as a benefit in kind: you pay income tax on its value even though you never receive it as cash.
This guide explains how health benefits are valued for the 2026/27 tax year, what they cost at 20% and 40% (and at the Scottish rates), how dental cover and health cash plans fit in, and which health benefits are exempt. Tax figures use the income tax bands in the js/tax.js engine behind the Take-Home Lab calculator. It is general information, not tax or insurance advice.
Private medical insurance tax calculator
2026/27 rates
Extra income tax, 2026/27
| Likely tax code if collected through your code | — |
|---|---|
| Taxable benefit | — |
| Tax as a share of the benefit | — |
| Your employer’s Class 1A NI (15%) | — |
The tax is the difference between income tax on your salary with and without the benefit, so it allows for the higher-rate threshold and the personal allowance taper. Assumes a standard £12,570 personal allowance and no other benefits. You pay no National Insurance on the benefit. General information, not tax advice.
How the benefit is valued
HMRC's rule is simple: the taxable value is the cost to your employer of providing the treatment or insurance. For a policy, that is the premium your employer pays for your cover, including insurance premium tax. It is not the retail price you would pay if you bought the same cover yourself. Employers often get a group rate, and it is that lower group cost that is taxed.
- Family cover: if the policy also covers your partner or children, the whole cost of their cover is taxed on you.
- Part of the year: if you join or leave the scheme part way through the year, only the cost for the months you were covered counts.
- Your own contributions: if you pay part of the premium from your net pay, that payment reduces the taxable value.
- Claims and excesses: the value is the cost of the cover, not what you claim. Making a large claim does not increase your tax, and an excess you pay on a claim does not reduce it.
Worked examples for 2026/27
Assumptions: 2026/27 · standard £12,570 personal allowance · no other benefits · the premiums are illustrative, not quotes · tax at your marginal rate.
| Benefit | Value | £35,000 (20%) | £60,000 (40%) | £35,000 Scotland (21%) | £60,000 Scotland (42%) |
|---|---|---|---|---|---|
| Individual PMI | £1,200 | £240.00 | £480.00 | £252.00 | £504.00 |
| Family PMI | £2,400 | £480.00 | £960.00 | £504.00 | £1,008.00 |
| Dental insurance | £240 | £48.00 | £96.00 | £50.40 | £100.80 |
| Health cash plan | £300 | £60.00 | £120.00 | £63.00 | £126.00 |
Scroll sideways to see the whole table →
For an individual £1,200 policy on a £35,000 salary, the tax is £240 a year, or £20 a month. Your employer pays Class 1A National Insurance of 15% on top, which is £180. You do not pay National Insurance on the benefit yourself.
If you have individual PMI, dental cover and a cash plan together, the values add up: £1,740 in total. That costs £348.00 a year at 20% and £696.00 at 40%. Collected through your tax code, it would reduce your personal allowance from £12,570 to £10,830, which is a 1083L code.
Example: joining part way through the year
You join a £1,200-a-year scheme on 6 October 2026, half way through the tax year. Only the six months of cover count, so the value for 2026/27 is £600. At 40% that is £240 of tax for 2026/27, and the full £1,200 counts from 2027/28.
Example: a family policy that crosses the higher-rate threshold
On a £48,000 salary, £2,270 of income is left before the £50,270 higher-rate threshold. A £2,400 family policy uses all of it: £2,270 is taxed at 20% (£454.00) and the last £130 at 40% (£52.00), so the cover costs £506.00 a year. On a £98,000 salary, the same policy would push £400 of income past £100,000 into the personal allowance taper, so it would cost £1,040.00: £2,000 at 40% and £400 at an effective 60%.
Dental insurance and health cash plans
Dental insurance paid by your employer is treated exactly like medical insurance: you are taxed on the cost to your employer.
A health cash plan pays you fixed cash amounts towards everyday costs such as dental check-ups, eye tests, physiotherapy or prescriptions. If your employer pays the plan premium, the premium is a benefit in kind and is taxed in the same way, as in the £300 example above. The cash you receive when you claim is not taxed again. Some employers offer cash plans or dental cover through a flexible benefits scheme where you give up salary for them. That is a salary sacrifice arrangement, and different rules apply (see below).
How it is reported and collected
How your employer reports a health benefit depends on who arranges and pays for it:
- Your employer arranges and pays the insurer or provider directly: it is reported on form P11D (or payrolled), and your employer pays Class 1A National Insurance. You pay income tax through your tax code or payroll.
- You arrange the cover, but your employer pays the provider: it is still reported on form P11D, but your employer must also add the value to your pay for Class 1 National Insurance. You pay employee National Insurance as well as income tax.
- Your employer reimburses you, or pays you a cash allowance for medical costs: this is simply pay. PAYE tax and Class 1 National Insurance are deducted through payroll.
Medical benefits are one of the first groups to be covered by mandatory payrolling. HMRC plans that from 6 April 2027 most employers will have to put them through payroll in real time instead of reporting them on a P11D after the year ends.
Health benefits that are exempt
You pay no tax, and your employer does not report anything, for these health benefits (unless they are provided through salary sacrifice):
- Health screening and medical check-ups: one health-screening assessment and one medical check-up a year.
- Medical treatment to help you return to work: up to £500 a year, if a health professional has assessed you as unfit for work for at least 28 consecutive days, or you have been absent through ill health for at least 28 consecutive days.
- Eye tests and glasses or contact lenses that health and safety law requires for screen work.
- Flu vaccinations, whether provided or reimbursed.
- Treatment abroad: medical treatment, or insurance for it, when you fall ill or are injured while working overseas for your employer.
- Work-related injuries or illness: treatment or insurance only for conditions caused by your work.
- Welfare counselling available to all staff, such as many employee assistance programmes. This does not cover medical treatment.
A health screening that turns into treatment is no longer exempt. The treatment is taxed in the normal way unless it falls into one of the other exemptions.
Health insurance through salary sacrifice
Some employers let you swap part of your salary for medical or dental cover. Since April 2017 these optional remuneration arrangements are taxed on the higher of the salary you give up and the cost of the cover. HMRC's own example is a policy costing the employer £500 in return for £600 of salary: the taxable value is £600.
If you give up exactly what the cover costs, say £500, you are taxed on £500 of benefit, but your salary falls by £500 so you save employee National Insurance on it. On £35,000 your take-home falls by £360.00 and you pay £100.00 of tax on the benefit: a total cost of £460.00, a saving of £40 (8% NI). On £60,000 the saving is only £10 (2% NI). The health exemptions above, such as the £500 return-to-work exemption, do not apply under salary sacrifice.
Is it worth keeping?
That depends on whether you would buy similar cover yourself. If you would, being taxed at 20% or 40% on a group-rate premium is usually much cheaper than paying the full retail premium from net pay. If you would not, the benefit costs you its tax every year. Some employers let you opt out, or move from family to individual cover. This site cannot advise on insurance; compare what the cover would cost you privately with the tax shown on your payslip or coding notice.
Using the two calculators together
The calculator at the top of this page works out the extra income tax on your health cover. The main take-home calculator does not include benefits in kind, so subtract that tax from its result to see your pay after the benefit. Do not add the premium to your salary in the main calculator, because that would also charge National Insurance and student loan on it.
Frequently asked questions
Is private medical insurance a taxable benefit?
Yes, usually. You pay income tax on the cost to your employer of your cover, and your employer pays Class 1A National Insurance at 15%. A £1,200 policy costs £240 a year at 20% and £480 at 40%.
Do I pay tax on my family's medical cover?
Yes. If your employer's policy covers your partner or children, the cost of their cover is added to your taxable benefit.
Are health cash plans taxable?
If your employer pays the premium, yes: the premium is a benefit in kind. The cash you receive when you claim is not taxed again.
Is a health check from my employer taxable?
No. One health screening and one medical check-up a year are exempt, as long as they are not provided through salary sacrifice.
Does the £500 return-to-work exemption cover any treatment?
It covers up to £500 of medical treatment to help you return to work after you have been assessed as unfit for work, or absent through ill health, for at least 28 consecutive days.
Check your salary in the calculator
Sources (checked 13 November 2026): GOV.UK expenses and benefits: medical or dental treatment and insurance (what's exempt, what to report, working out the value); HMRC 480 chapter 5: non-taxable payments and benefits (health screening, treatment abroad, welfare counselling); HMRC 480 appendix 12: optional remuneration arrangements; HMRC rates and thresholds for employers 2026 to 2027 (Class 1A 15%); HMRC mandatory payrolling from April 2027. Tax examples from the Take-Home Lab calculator engine for 2026/27. Illustrative only — not tax or insurance advice. Rodway Labs · hello@takehomelab.co.uk.