Tax on £1,500 Private Medical Insurance
£80,000 salary · England & Wales · 2025-26
PMI benefit in kind tax breakdown — 2025-26
| PMI BIK value (employer premium) | £1,500 |
| Gross salary | £80,000 |
| Total taxable income (salary + PMI) | £81,500 |
| Income Tax on PMI | £600/year |
| National Insurance on PMI | £30/year |
| Total annual tax cost | £630/year |
| Monthly tax cost | £53/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 £1,500 PMI worth it after tax?
| PMI cover value | £1,500/year |
| Tax cost (IT + NI) | £630/year |
| Net benefit value | £870/year |
| Monthly net benefit | £73/month |
Employer group PMI premiums are typically well below retail private health insurance prices. Even after paying £630 in tax, you receive £1,500 of cover — which would cost considerably more if purchased individually. For most employees, accepting the BIK tax is the better financial decision.
Personalised insights for this PMI benefit
Buying the equivalent £1,500 cover privately at retail rates (typically around 1.6× employer group pricing, ~£2,400/year) would cost you £1,770 more per year than accepting the BIK tax. Keeping the employer PMI wins unless retail insurers offer a promotion near group pricing. On a £80,000 salary, the £53/month BIK tax consumes just 1.4% of your estimated net monthly pay — a small slice of take-home for what would otherwise be substantially more expensive retail cover.
Tax on £1,500 employer health insurance on £80,000 salary — explained
Employer-provided private medical insurance is a benefit in kind under HMRC rules. On a £80,000 salary with £1,500 PMI cover, your total taxable income rises to £81,500. The additional Income Tax on the PMI is £600 per year, and National Insurance adds a further £30 — giving a total annual tax cost of £630 (£53/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 £870 per year (£73/month). This compares favourably with buying equivalent private health insurance directly, where premiums are substantially higher than group rates.
Looked at in total-cost terms, your employer pays the £1,500 premium and you pay £630 in personal tax — a true economic cost of £2,130/year for £1,500 of cover. The BIK tax itself equals just 1.4% of your estimated monthly net pay, making the hit almost invisible versus sourcing comparable cover yourself at around £2,400/year on retail pricing — an annual gap of £1,770 in your favour for keeping the employer scheme.
Frequently asked questions
Do I pay tax on private health insurance from my employer on a £80,000 salary?
Yes — employer private medical insurance is a benefit in kind. On a £80,000 salary with £1,500 of PMI cover, you pay £600 in Income Tax and £30 in National Insurance on the benefit — a total of £630 per year (£53/month). This is deducted through your PAYE tax code.
Is £1,500 PMI worth it after tax on a £80,000 salary?
On a £80,000 salary, the total tax cost on £1,500 PMI is £630 per year. That means you effectively receive £870 of net benefit (£73/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 (£1,500). 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 £80,000 salary, the annual tax cost of £630 may well be worth paying for £1,500 of cover.
What is the monthly cost of the £1,500 private medical insurance BIK on a £80,000 salary?
The monthly tax cost of £1,500 employer PMI on a £80,000 salary is £53/month. This is deducted through your PAYE tax code, so you will not receive a separate bill. Over a full tax year the total is £630 — made up of £600 Income Tax and £30 National Insurance on the benefit value.
Is £1,500 employer PMI worth it compared to taking a salary increase instead?
On a £80,000 salary, the £1,500 PMI benefit costs you £630 in tax, leaving a net benefit value of £870 per year (£73/month). If your employer offered the equivalent as a cash salary increase, it would be taxed at your marginal rate, netting you considerably less. Additionally, group employer PMI premiums are typically 30-50% cheaper than equivalent retail policies, making the BIK benefit worth accepting in most cases.