Tax on £2,000 Private Medical Insurance
£70,000 salary · England & Wales · 2025-26
PMI benefit in kind tax breakdown — 2025-26
| PMI BIK value (employer premium) | £2,000 |
| Gross salary | £70,000 |
| Total taxable income (salary + PMI) | £72,000 |
| Income Tax on PMI | £800/year |
| National Insurance on PMI | £40/year |
| Total annual tax cost | £840/year |
| Monthly tax cost | £70/month |
Tax calculated using 2025-26 England & Wales Income Tax and National Insurance rates. The PMI BIK value is added to your gross salary and taxed at your marginal rate.
Is £2,000 PMI worth it after tax?
| PMI cover value | £2,000/year |
| Tax cost (IT + NI) | £840/year |
| Net benefit value | £1,160/year |
| Monthly net benefit | £97/month |
Employer group PMI premiums are typically well below retail private health insurance prices. Even after paying £840 in tax, you receive £2,000 of cover — which would cost considerably more if purchased individually. For most employees, accepting the BIK tax is the better financial decision.
Tax on £2,000 employer health insurance on £70,000 salary — explained
Employer-provided private medical insurance is a benefit in kind under HMRC rules. On a £70,000 salary with £2,000 PMI cover, your total taxable income rises to £72,000. The additional Income Tax on the PMI is £800 per year, and National Insurance adds a further £40 — giving a total annual tax cost of £840 (£70/month).
HMRC collects this tax by adjusting your PAYE tax code — reducing your personal allowance by the PMI value so additional tax is taken from your monthly salary without a separate bill. Your employer reports the BIK on a P11D form (or via payrolled benefits) at the end of each tax year.
The net value of the benefit after tax is £1,160 per year (£97/month). This compares favourably with buying equivalent private health insurance directly, where premiums are substantially higher than group rates.
Frequently asked questions
Do I pay tax on private health insurance from my employer on a £70,000 salary?
Yes — employer private medical insurance is a benefit in kind. On a £70,000 salary with £2,000 of PMI cover, you pay £800 in Income Tax and £40 in National Insurance on the benefit — a total of £840 per year (£70/month). This is deducted through your PAYE tax code.
Is £2,000 PMI worth it after tax on a £70,000 salary?
On a £70,000 salary, the total tax cost on £2,000 PMI is £840 per year. That means you effectively receive £1,160 of net benefit (£97/month) — still significantly better than buying equivalent private health insurance yourself, as employer group rates are typically much lower than retail premiums.
How does HMRC collect tax on employer PMI?
HMRC adjusts your PAYE tax code to reduce your personal allowance by the PMI BIK value (£2,000). This means additional Income Tax is collected gradually through your monthly pay without a separate bill. National Insurance on the BIK is also collected through payroll. Your employer reports the BIK value on your P11D (or via payrolled benefits) each tax year.
Can I opt out of employer private medical insurance to avoid the tax?
Yes — if your employer allows it, you can opt out of the PMI scheme and avoid the BIK tax entirely. However, you would lose the health cover. Whether it is worth opting out depends on your health needs, whether you would buy private cover independently, and your marginal tax rate. On a £70,000 salary, the annual tax cost of £840 may well be worth paying for £2,000 of cover.
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