Can I buy health insurance or gym membership via my limited company?

When you set up as a limited company contractor, you will encounter a myriad of different rules governing expenses. Some expenses rules are clear-cut, whereas others are more complex.

Many permanent employees have access to gym facilities, and even more, will receive some kind of health or private medical insurance as part of their employment package.

When you make the transition from permanent to contract, you may well wonder if you can take out health-related products via your limited company.

Unfortunately, the golden rule is that you can only claim for expenses that have been incurred wholly and exclusively for business purposes. Although your company can pay for these expenses, you will be taxed for the privilege.

Benefit in Kind liabilities

Derek Kelly from ClearSky Accounting explains:

“Health insurances and gym memberships can both be paid directly by the company and the full costs are deductible when arriving at the taxable profits for the year.

“However, a benefit in kind will arise for the employee/director based upon the amount paid by the company and tax will be payable at either 20%, 40%, or even 45% dependent on the individual’s other income.

“In addition, the company incurs a Class 1A National Insurance charge equivalent to 13.8% on the amount paid for the insurance or membership.”

So, your limited company can pay for the costs of health insurance, but you will incur a personal tax charge for the benefit.

Exceptions to the rules

There are a few exemptions to this rule – eye tests, annual health checks for directors and employees (such as BUPA health assessments), glasses (for VDU work), and overseas medical treatment do not incur a benefit in kind charge.

If you pay for both UK and overseas medical treatment via your company, only the overseas part will be exempt from benefit in kind charges.

As ever, you should check with your accountant if you have any expense-related questions.

For the official line on claiming health-related expenses via your limited company, consult HMRC EIM manuals EIM21765 and EIM21762.

Pay for health insurance personally or via your company?

It is possible that you are still better off overall by paying for medical insurance via your own limited company than personally.

You will need to check with your accountant to compare the overall financial cost, as this depends on your personal situation.

Also, some insurance providers offer more attractive rates to business clients. Sometimes the difference can be significant.

Find out more about health insurance

If you would like our dedicated IFA, Broadbench, to create a no-obligation health insurance quote for you, and explain your options, simply fill in this form, and the team will get right back to you.

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    About the Editor

    • James Leckie

      James is an experienced business and finance writer. He studied economics and worked for large companies including British Airways, Citi and JP Morgan before working as a data analyst IT contractor in the late 1990s and 2000s. He founded Contract Eye in 2006 and also writes widely for a number of popular business sites. Connect with James on LinkedIn.

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    Last updated: 11th April 2023