A P11D health insurance calculation has two inputs and one multiplication: the cash equivalent of the cover (what your employer paid for it, less anything you paid back) multiplied by your own marginal rate of income tax. HMRC's guidance defines the inputs; everything after that is arithmetic. If you are running the sum to decide whether the work cover is worth keeping, a priced alternative in your own name is the other half of the answer; an FCA-authorised broker can fetch one from several insurers, and the form on this page books that call-back, free.
Your rate comes from GOV.UK's Income Tax rates and Personal Allowances page for the tax year in question, or from the Scottish Income Tax pages if you live in Scotland, where the bands differ. The sections below show where each input is found and how HMRC's guidance says it is worked out.
The P11D medical insurance calculation in one line
The charge itself comes from HMRC's Employment Income Manual. Under EIM21762, when an employer pays towards a medical insurance scheme that covers an employee or director, or their family or household, the taxable amount is the premium paid for that person's cover and their family's, less any part of it that the employee makes good. (The manual is written for HMRC staff; its header gives an update date of 21 October 2026.) GOV.UK's employer guide on medical or dental treatment and insurance (no update date printed; read 22 October 2026) puts the same idea from the payroll side: the value is what providing the cover costs the employer.
So the line reads: employer's premium for you and anyone covered with you, minus your contributions, equals the cash equivalent. Your tax is the cash equivalent taxed at the rate, or rates, that apply to that slice of your income.
Three things follow from the wording. The figure is a cost to the employer, so it need not match what you would pay for the same policy on your own. Family members are inside it, because the charge covers premiums paid for them. And the rate is yours, not a fixed medical-insurance rate: the benefit is added to the rest of your taxable income, and whatever band that slice falls in sets the tax. If the benefit crosses from one band into the next, each part is taxed at its own band's rate.
Group schemes: finding your share of one premium
Many company schemes are billed as a single premium. EIM21763 deals with this directly. It says that usually the employer's policy terms will show what amount relates to each employee or each category of employee, and then: "If exceptionally it is not clear from the terms of the policy, you can accept any reasonable method of apportionment which is adopted by the employer and which is generally accepted by the employees." The "you" there is the HMRC officer, so the sentence tells you what the tax office will accept, not a method you choose yourself.
In practice your starting figure is the amount the policy attributes to your category (for example, employee only, or employee plus partner), and the employer's benefits or payroll team is the place to ask for it. Two neighbouring manual pages cover cases a group scheme often meets:
- Retirement. EIM21764 says no benefits-code charge can arise on medical insurance after retirement, because a pension is not an employment, although the cost can still be taxed as employment or pension income in the situations it lists (for example, where it is a specific part of the pension or part of a termination package). In the year someone retires, it says, the premium may need apportioning, and any reasonable manner of apportionment can be accepted.
- Treatment abroad on business. EIM21766 exempts medical treatment outside the UK where the need arises while the employee is abroad to do their job, and the exemption extends to insurance against that cost. It covers the employee only, not family or household members.
How the cover was bought also decides which line it goes on. GOV.UK's guide on completing the P11D (last updated 6 April 2026) tells employers that where the employee arranged the medical or dental expenses or insurance and the employer paid, the amount goes in the section for payments made on behalf of the employee, not on the medical line. If you chose the policy and your employer pays the insurer, look there on your P11D copy.
Making good: the input you can change
The deduction in the formula is called making good. EIM21120 says making good "simply means giving something in return for the benefit", and that the employee gives money or something that can be measured in money, usually by a direct payment, a deduction from salary, or a debit to the employee's account in the employer's books. Giving services, or anything not measured in money, does not count.
Timing matters. EIM21119 says that for benefits that are not payrolled, the latest date for making good is 6 July following the end of the tax year in which the benefit is provided, if the amount is to count for tax and National Insurance. HMRC's Class 1A guidance, CWG5, adds that a making-good payment by 6 July also removes or reduces the employer's Class 1A liability, and that one made after 6 July does not. Payrolled benefits work to a different date, set out in HMRC's payrolling guidance.
Salary sacrifice is the exception to the cost rule. GOV.UK's medical guide says employers must still report medical insurance provided through salary sacrifice, and: "If the cost of the medical or dental treatment or insurance is less than the amount of salary given up, report the salary amount instead." In that case the salary you gave up, not the premium, is the figure that goes into the calculation.
Contributing for a partner or children from your pay lowers the taxable value, but it is still money you pay. Whether that beats a separate policy for them is a price comparison, and a broker can quote family cover at the scheme's excess and limits once your details are in the form on this page.
Where the cash equivalent sits on your P11D
After the tax year ends, an employer that has not payrolled the benefit reports it on form P11D. The completion guide for the 2025 to 2026 forms names the line "Private medical treatment or insurance" and tells the employer to enter the cost of medical and dental expenses it arranged and paid for, and all premiums paid for insurance against the treatment.
On the specimen P11D reproduced in HMRC's Employment notes for Self Assessment (SA102 Notes 2026, print code HMRC 12/25), that line is section I. It runs as a three-column subtraction: the cost to the employer (or amount foregone), minus the amount made good or from which tax was deducted, equals the cash equivalent (or relevant amount, the salary sacrifice figure). The third column is the number your income tax and the employer's Class 1A are worked from. If you file a return, that figure goes on the Employment page; the page on private health insurance on a tax return takes it from there, and private medical insurance on a P11D is the place for the form itself.
Working your own figures through
With section I (or your payslip, if benefits are payrolled) in front of you, the calculation runs in five steps:
- Take the cost column. This is the premium your employer paid for you and anyone covered with you over the tax year, or your category's share of a group premium.
- Subtract what you made good. Only contributions made in money, and by the deadline above, count. The result should match the cash equivalent column.
- Place it on top of your other income. Add the cash equivalent to your salary and other taxable income for the same tax year.
- Look up the band. Use GOV.UK's Income Tax rates page for that tax year, or the Scottish bands if they apply to you. If the benefit lands across a band boundary, split it at the boundary.
- Multiply. Apply each rate to the part of the benefit in its band, and add the parts. The total is the income tax the cover costs you for the year.
Two checks before you trust the answer. First, GOV.UK's adjusted net income guidance (last updated 30 May 2025) counts "money you earn from employment (including any benefits you get from your job)" in net income, so the benefit can also feed into the income-linked reduction of the Personal Allowance and the High Income Child Benefit Charge; if either could apply to you, the simple multiplication may understate the cost, and an accountant or HMRC can confirm it. Second, on the P11D route the tax is normally collected through your tax code over a later year, so the sum tells you the cost, not when it leaves your pay; what private health insurance costs you in tax covers collection, coding and the other ways of paying for cover.
The employer's half: Class 1A National Insurance
Where your employer arranges the cover and pays the insurer directly, GOV.UK's medical guide puts the National Insurance on the employer: it reports the benefit on form P11D and pays Class 1A National Insurance on its value. (Cover you arranged yourself and the employer paid for is treated differently, through Class 1 in payroll.)
CWG5 (the 2026 edition, page updated 10 February 2026) says Class 1A is calculated as a percentage of the cash equivalent, the same figure reported on the P11D or payrolled, and that the employer adds together every cash equivalent for every employee and multiplies the total by the Class 1A rate. That rate, it says, "is the employers’ Class 1 National Insurance contributions rate for the tax year in which the benefit is made available". GOV.UK's Rates and thresholds for employers page gives the figure for the current tax year. Where cover is provided through salary sacrifice, CWG5 says the charge is worked on the relevant amount instead.
The same guidance sets the year-end dates: 6 July for the P11D and P11D(b) (the return of Class 1A due), 19 July for a cheque payment to reach HMRC by post, and 22 July for an electronic payment to clear. Errors found after submission are corrected through HMRC's online P11D(b) and P11D amendment forms.
For a reader comparing a scheme with a personal policy, Class 1A is a cost to the employer, not to you; it changes what the scheme costs the company but not the income tax figure you have just worked out.
From 6 April 2027: medical benefits move into payroll
The arithmetic stays the same in 2027; the reporting changes. HMRC's interim mandatory-payrolling guidance for benefits in kind and expenses (page updated 23 September 2026) says that from 6 April 2027 Income Tax and Class 1A on certain benefits will start being reported in real time, in phases, and lists "employer-provided medical benefits" in phase 1 alongside company cars, car fuel, vans and van fuel. Most other benefits are due to follow from April 2028, with loans and accommodation staying voluntary. Under that plan your employer will spread the medical benefit across your pay periods and deduct the tax as you go, with Class 1A reported at the same time, and HMRC expects most employers will then stop filing P11D and P11D(b) forms.
Annex 1 of the guidance works through HMRC's own example for a basic-rate taxpayer: it divides the employer's annual cost across the monthly pay periods, then shows the tax taken from the employee's pay each month and the Class 1A National Insurance the employer pays on top. HMRC adds: "The actual amount of tax deducted may depend on the employee’s wider pay and tax position." The annex has the worked figures; your own depend on the premium and on your tax position.
The same annex says the employer divides the cost over the remaining pay periods in the tax year, adjusts the value in-year if the cost changes and the change is known, and can correct a cost that only becomes known later at the year end. Employers will also be able to opt globally mobile employees out of mandatory payrolling, keeping the P11D route for them. The publication is interim: HMRC says both the guidance and the draft legislation could still change before final versions appear, from Autumn 2026 onwards, so treat the 2027 detail as the plan as published.
Once the scheme's value is coming off each payslip, the comparison with a policy of your own becomes easier to see month by month. Before the broker rings, put the scheme's excess, hospital list and limits next to the phone, so the personal quote is like for like; that call is yours to request, free, on the form on this page.
P11D medical insurance: less common situations
My employer gives me the money and I buy the policy. Is that on section I?
No. GOV.UK's medical guide treats reimbursing an employee's costs as earnings, so the money goes through payroll with your salary, with PAYE and Class 1 deducted as on any other pay. It is taxed as pay rather than worked out as a benefit.
Does health cover that carries on after I retire still count?
Not under the benefits code, says EIM21764, though the cost can be taxed as pension or employment income in the cases the manual lists. In the year you retire the premium may be apportioned; payroll can tell you how your scheme did it.
Is insurance for treatment on a business trip abroad part of the figure?
Cover for the employee's own treatment outside the UK, where the need arises on a work trip, is exempt under EIM21766, and so is insurance against that cost. Cover for family members travelling with you is not part of that exemption.
I joined the scheme part-way through the year. What cost goes in?
Because the taxable amount is built from premiums paid for your cover, the cost column should hold what your employer actually paid for your cover in that tax year rather than a full year's price. How a mid-year start was billed depends on the scheme, and payroll can show you the figure they used.
My section I figure looks wrong. Who corrects it?
The P11D is your employer's return, so start with payroll or HR: they hold the premium, your category and any contributions. An employer that finds an error after submitting corrects it with HMRC's online P11D and P11D(b) amendment forms, and HMRC can tell you what it holds on record for your tax code.