Private Medical Insurance BIK Tax 2025-26
When your employer pays for private health insurance (PMI), HMRC treats it as a taxable benefit in kind. You pay Income Tax and National Insurance on the market value of the cover — reducing (but not eliminating) its value.
How PMI benefit in kind tax works
The BIK value of employer-provided health insurance equals its market value — typically the premium your employer pays. This is added to your gross salary for Income Tax and National Insurance purposes. A basic rate taxpayer pays 28p of tax per £1 of PMI value (20% IT + 8% NI); a higher rate taxpayer pays 42p (40% IT + 2% NI).
Quick reference: £1,000 PMI — monthly tax cost by salary
£25,000 salary — PMI BIK tax
£30,000 salary — PMI BIK tax
£35,000 salary — PMI BIK tax
£40,000 salary — PMI BIK tax
£50,000 salary — PMI BIK tax
£60,000 salary — PMI BIK tax
£70,000 salary — PMI BIK tax
£80,000 salary — PMI BIK tax
Do you pay tax on employer private health insurance?
Yes — private medical insurance provided by your employer is a benefit in kind and is fully taxable. HMRC adds the market value of the cover (typically the premium your employer pays) to your gross income. You then pay Income Tax at your marginal rate and National Insurance at 8% (or 2% above £50,270) on that amount.
The tax is collected through your PAYE tax code — HMRC adjusts your code to reduce your personal allowance by the BIK value, so additional tax is taken from your salary each month without a separate bill.
Is PMI worth it if I pay tax on it?
In most cases, yes. Even after tax, employer PMI typically costs less than buying equivalent private cover individually. Group schemes offer lower premiums due to pooled risk, and employers often cover the full premium. A basic rate taxpayer paying £280 tax per year on £1,000 of PMI cover still receives £1,000 worth of health coverage — the net cost is £280, far below retail private health insurance.