As an indicative market guide for October 2026, a UK company scheme with mid-range cover costs roughly £500 to £1,200 per employee per year in premium, and the employer's real bill is that premium plus Class 1A National Insurance on the benefit and the work of reporting it to HMRC. That range is not a quote and not any insurer's price; your own figure depends on your staff list. Staff also pay income tax on the cover, which never reaches your accounts but shapes how the scheme lands with them. If you are deciding whether to offer private healthcare to employees, or how to fund it, the form on this page asks an FCA-authorised broker to call you back, free, and price the premium on your real headcount.
How much does health insurance cost per employee once everything is counted?
An employer meets four kinds of cost, and only one of them comes on the insurer's paperwork.
- The premium. A group insurer prices the people on the scheme: how many, their ages, where they work, which cover options you pick and how earlier medical history is treated.
- Class 1A National Insurance. A charge the company pays on the value of the benefit. Nothing is taken from staff pay for it.
- Administration. Reporting the benefit each year, a job that moves into payroll from April 2027 (covered further down).
- The employee's income tax. A cost to each member rather than the company, but it is why staff may value "free" cover at less than its price, so it belongs in the decision about who pays what.
The indicative band in the opening paragraph describes the market as a whole, not your firm, and the ages, locations and cover choices on your own list can put you outside it in either direction. AXA Health has published worked per-employee examples for firms of different sizes, each with the assumptions printed beside it; they are laid out on what group health insurance costs rather than copied here.
Insurance Premium Tax needs no separate line in your budget. GOV.UK's guide for insurers calls it "a tax on general insurance premiums" (page last updated 6 March 2019), and as we understand the general position the premium an insurer quotes a business already carries it.
Class 1A and the employee's tax on a company-paid scheme
Where the company arranges the scheme and pays the insurer itself, GOV.UK's employer guidance on medical or dental treatment and insurance (read 22 October 2026) says the benefit must be reported, with Class 1A National Insurance due from the company on what it is worth. Working out that value takes one line of the guidance: "The value to use is the cost to you of providing the treatment or insurance." Whatever the company spends per head therefore becomes the base for both its own Class 1A and each member's tax. The arithmetic, without rates, is on private health insurance and tax, and a member can run their own figure on the P11D health insurance calculator.
Family cover enlarges that base. AXA Health's guide to company health insurance and tax (copyright line 2026, read 22 October 2026) gives approximate multipliers, partner cover at twice the single price and family cover at two and a half times, and tells employers to check the breakdown with their own provider. Every partner or child added raises the premium and the reported value together, unless the member pays towards it.
Cover limited to work-caused illness and injury is treated differently, but the exemption is narrow. HMRC's Employment Income Manual (EIM21770, updated 21 October 2026) explains that a policy an employer takes out purely against work-related injury or illness, covering the employee alone and not their family or household, gives no taxable benefit. The same page is clear that once the policy also covers injuries suffered away from work, a benefit arises. A conventional company scheme pays for treatment however the condition arose, so read the manual page with your accountant before assuming any part of yours is exempt.
On the staff side, the same guide warns that "The P11D benefit in kind may result in your employees being sent a revised tax code to reflect any under or overpayment of tax." Explaining that before the scheme starts saves a round of questions after the first change. The guide also offers employers copies of the annual plan summary and the formula used for members and family members, the figures a payroll team works from; ask each insurer on your shortlist what it would send you.
Paying for private healthcare for employees: five funding routes and what each one triggers
Who pays the insurer, and how, decides what the company reports and which National Insurance applies. The table follows GOV.UK's "What to report and pay" and "Work out the value" pages (read 22 October 2026), except the staff-contribution row.
| Funding route | What the employer does | Employer National Insurance |
|---|---|---|
| Company arranges and pays the insurer directly | Reports the benefit (on a P11D for now); the value is what the cover costs the company | Class 1A on that value |
| Company pays, staff contribute towards their own or family cover | AXA's guide says the member's contribution comes off the premium figure before it is reported | Class 1A on the value reported |
| Salary sacrifice | Still reports the cover; if it costs less than the salary given up, the salary amount is reported instead | Confirm the treatment with your accountant |
| Employee arranges the policy, company pays the insurer | Reports on a P11D and adds the value to earnings for Class 1 National Insurance, though not for PAYE tax | Class 1 through payroll |
| Company reimburses staff, or pays a cash allowance or extra salary for medical costs | Treats the payments as earnings, with PAYE tax and Class 1 through payroll | Class 1 through payroll |
Reimbursing staff can look simpler than running a scheme, but the money is then pay like any other, with tax and Class 1 deducted through payroll. A sixth option sits outside the table: cover that employees buy for themselves through work. AXA Health's corporate page on employee-paid private healthcare describes a scheme in which, with the employer's agreement, the insurer invites staff to join and each person picks and pays for their own cover, so the company carries no premium. How any deductions for that kind of scheme are handled on payroll turns on how it is set up, and that is a question for your accountant before you choose.
Once you know which route you would use, a broker can price it: a fully funded scheme, one with family cover paid by staff, or both, on the same list in the same call.
The reporting job: a P11D now, payroll from April 2027
Under today's process the company files a P11D for each member after the tax year ends, and a P11D(b) for the Class 1A, which GOV.UK's Class 1A payment guidance says must be paid by 22 July for the tax year just ended.
HMRC's interim guidance and draft legislation on mandatory payrolling (page updated 23 September 2026) puts employer-provided medical benefits in its first phase, starting 6 April 2027, with a second phase from 6 April 2028. Income tax and Class 1A on the cover will then be reported in real time through payroll, and HMRC expects the change, once complete, to remove P11D forms for most employers. The guidance warns that it is not final: "Both the guidance and legislation may change before final versions are published from Autumn 2026 onwards." HMRC also notes that the draft legislation had not been laid before Parliament, so plan for the direction and expect detail to move.
For a company scheme, three practical effects stand out in the guidance as published.
- The benefit is taxed in slices. HMRC's worked example spreads the yearly cost of the medical benefit over the pay periods left in the tax year and adds each slice to the member's taxable pay.
- Renewal becomes a payroll event. "If the cost of the medical benefit changes, the employer should adjust the value in-year for the remaining pay periods where the change is known." The renewal notice needs to reach whoever runs payroll.
- Year one has a softer penalty regime for errors, not for lateness. HMRC says payrolling errors in 2027 to 2028 returns "will not be charged penalties for inaccuracies unless there is evidence of deliberate non-compliance", while existing late filing and late payment penalties continue.
Any fee your payroll bureau or software adds for this is between you and them. What the broker can do on the call-back is tell you which per-member figures and renewal documents each insurer on the quote supplies for payroll. Book that conversation before anything is signed, using the form on this page.
Does the scheme reduce the company's tax bill?
It can, though the employees are still taxed on the cover, so a deduction for the company never makes the benefit tax-free for staff. AXA Health's tax guide, which says its answers are "designed as a guide only and details may change at any time", states for limited companies: "If you are buying healthcare cover through a Limited company, it is eligible for tax relief as business healthcare cover is classed as business expenditure." For an unincorporated business it says the cost of cover for employees is deductible in working out taxable profits.
HMRC's own starting point for any business cost is the wholly-and-exclusively rule, explained in its Business Income Manual at BIM37007 (updated 4 August 2026). A side benefit to someone else does not by itself sink a deduction: "Such an incidental benefit does not, of itself, mean that the expenditure is disallowed." What the test means for directors' own cover is on the director health insurance page.
The tax inside the premium follows the premium. BIM45595 (updated 4 August 2026) says: "Where an insurance premium is deductible from trading profits, any associated insurance premium tax is also an allowable deduction." What any deduction is worth turns on the company's own profits, so the figure comes from your accountant, not from this page.
Adding it up before the quotes come in
A total you can budget against is the premium plus the items that never appear on the quote. Gather these first:
- Headcount, ages and work postcodes, and whether partners and children are in or out.
- The funding route from the table above, and any staff contribution.
- The per-employee premium for each version you are weighing, and the date it stays valid.
- Your accountant's estimate of Class 1A on the reported value, and what the deduction is worth to the company.
- What staff will see in their tax, and how you will tell them.
- Who handles the P11D or payroll work, and when the premium is next due to change.
When the staff list is ready, the form on this page can put the first three items to a broker, who can price two or three versions side by side. The rest are for your accountant and payroll team.
Smaller questions on the employer's side of the cost
Is health insurance for a small business with fewer than 10 employees priced differently per head?
The indicative band is for company schemes generally and is not split by firm size. What a very small team does need to check is who will take it on: each insurer names the group sizes its schemes are built for, set out on the group scheme comparison, and small-firm buying has its own page at private health insurance for small businesses. On the call-back a broker can say which insurers it can quote for a team of your size.
Does choosing cheaper cover also lower the company's National Insurance?
Because the reported value is the cost to the employer, a lower premium generally means a lower value for Class 1A and for each member's tax. The catch is where the saving comes from: a higher excess, for example, moves cost onto staff when they claim, and a shorter hospital list narrows where they can be treated. How the first of those works is on the excess explained.
An insurer's guide says payrolling started in April 2026. Which date is right?
AXA Health's tax guide, as read on 22 October 2026, still says HMRC announced payrolling of all taxable benefits from April 2026. HMRC's own interim guidance, updated 23 September 2026, gives 6 April 2027 for medical benefits and says the detail may still change, so plan around HMRC's date and check it again before April.