Tax cost of company medical insurance?
Discussion
CC07 PEU said:
If I elect to take up our company's private medical insurance, is there a quick way of working out how much it will cost me in tax annually (if I know the value of the insurance)?
The company need to tell you the taxable value, then its just that times your top tax rate.All that happens is that your Personal Tax Allowances (i.e. your PAYE Tax Code) is reduced by the amount the company is paying for your medical insurance.
If your allowances for 2012/13 are going to be £8,015 and the company will be paying £1,000 for the insurance, in theory your allowance will reduce by £1,000 to £7,015.
The one flaw in the system is that HMRC will find out about the medical insurance paid for 2012/13 when the imployer sends in the P11D for 2012/13 sometime AFTER 5 April 2013 - so, in reality, yuou won't have your coding affected until tax year 2013/14. In other words, you will always pay the tax on the medical insurance one year in arrears.
Are you a higher rate taxpayer?
If your allowances for 2012/13 are going to be £8,015 and the company will be paying £1,000 for the insurance, in theory your allowance will reduce by £1,000 to £7,015.
The one flaw in the system is that HMRC will find out about the medical insurance paid for 2012/13 when the imployer sends in the P11D for 2012/13 sometime AFTER 5 April 2013 - so, in reality, yuou won't have your coding affected until tax year 2013/14. In other words, you will always pay the tax on the medical insurance one year in arrears.
Are you a higher rate taxpayer?
In general I agree with Eric Mc.
However, HMRC gets used to you being in a company sponsored private medical plan, so they will get round to including a reduction in allowances when assessing your tax code and sending you the PAYE notification of coding in advance of each new tax year. It still means that any difference in amount is always collected a year late.
I retired a few years ago and I've continued to be in my ex employer's private medical plan for me and the wife, both paid for by my ex employer. However, I am fully taxed on the TOTAL conrtribution for the two of us, something I've never understood as there's no way I will ever benefit from the wife's cover. Why isn't the cost split so we each pay our own share of the tax due? All my PAYE coding notifications always allow for the inclusion of the private medical cover, and it's always adjusted once HMRC get to know of any changed amount, which means that after self assessment I have relatively little o/s tax due.
R.
However, HMRC gets used to you being in a company sponsored private medical plan, so they will get round to including a reduction in allowances when assessing your tax code and sending you the PAYE notification of coding in advance of each new tax year. It still means that any difference in amount is always collected a year late.
I retired a few years ago and I've continued to be in my ex employer's private medical plan for me and the wife, both paid for by my ex employer. However, I am fully taxed on the TOTAL conrtribution for the two of us, something I've never understood as there's no way I will ever benefit from the wife's cover. Why isn't the cost split so we each pay our own share of the tax due? All my PAYE coding notifications always allow for the inclusion of the private medical cover, and it's always adjusted once HMRC get to know of any changed amount, which means that after self assessment I have relatively little o/s tax due.
R.
The Leaper said:
In general I agree with Eric Mc.
However, HMRC gets used to you being in a company sponsored private medical plan, so they will get round to including a reduction in allowances when assessing your tax code and sending you the PAYE notification of coding in advance of each new tax year.
Yes, don't you end up paying double one year as they catch up on the first year's non-payment? Or can it picked up quarterly like company car changes are supposed to be?However, HMRC gets used to you being in a company sponsored private medical plan, so they will get round to including a reduction in allowances when assessing your tax code and sending you the PAYE notification of coding in advance of each new tax year.
The Leaper said:
Why isn't the cost split so we each pay our own share of the tax due?
I suppose because it's a benefit derived through YOUR (former) employment.Deva Link said:
I suppose because it's a benefit derived through YOUR (former) employment.
THAT is the issue. It is the EMPLOYEE who is receiving the benefit from the EMPLOYER. The same goes for other benefits - such as provision of accomodation or education fees. I am sure other family members would also benefit from such benefits but it is essentially the employee who is getting the benefit by dint of his employment.
Eric Mc said:
Deva Link said:
I suppose because it's a benefit derived through YOUR (former) employment.
THAT is the issue. It is the EMPLOYEE who is receiving the benefit from the EMPLOYER. The same goes for other benefits - such as provision of accomodation or education fees. I am sure other family members would also benefit from such benefits but it is essentially the employee who is getting the benefit by dint of his employment.
Just wondering !!!!!!!
Eric Mc, I hear what you're saying but I do find it difficult to see what BENEFIT I personally get. If my wife has a medical problem she will make a claim and she will get the attention from the medical plan, and not have any personal income tax liability. So, she gets the benefit and does not need to declare anything for it in her self assessment. I, however, have no benefit of her part in the medical plan, will never make a claim for her, and yet I get the entire cost deducted from my personal allowances and do have to declare the cost when completing my self assessment. Seems odd to me.
R.
R.
KelWedge said:
OK, But whats your thoughts if the wife is also on the the payroll of the company. The medical insurance policy is provided to the Husband which also covers the wife, but she is only entitled to it because of his position. The premium on the policy details the split of premium. On the P11D do you only put the Husbands premium on, Wifes income in total is below £8.5k.
Just wondering !!!!!!!
The husband and wife might get away with that, unless it became apparent to a tax inspector that the benefit wasn't generally available and was only given to the wife by virtue of her position.Just wondering !!!!!!!
An inspector I know picked up a smallish company had 2 Mercedes CLKs on the books but no tax or NI was being paid on them. "Oh", said the bookeeper, "they're used by the Directors wives and they're not employees so there's not tax or NI to pay." The Directors weren't very happy with the bill they got!
The Leaper said:
Eric Mc, I hear what you're saying but I do find it difficult to see what BENEFIT I personally get. If my wife has a medical problem she will make a claim and she will get the attention from the medical plan, and not have any personal income tax liability. So, she gets the benefit and does not need to declare anything for it in her self assessment. I, however, have no benefit of her part in the medical plan, will never make a claim for her, and yet I get the entire cost deducted from my personal allowances and do have to declare the cost when completing my self assessment. Seems odd to me.
R.
I fear there is no explanation that you would be able to grasp.R.
You seriously don't think that having private medical care available to YOUR (look, that word is in capitals again!) wife is any benefit to you?
The Leaper said:
Eric Mc, I hear what you're saying but I do find it difficult to see what BENEFIT I personally get. If my wife has a medical problem she will make a claim and she will get the attention from the medical plan, and not have any personal income tax liability. So, she gets the benefit and does not need to declare anything for it in her self assessment. I, however, have no benefit of her part in the medical plan, will never make a claim for her, and yet I get the entire cost deducted from my personal allowances and do have to declare the cost when completing my self assessment. Seems odd to me.
R.
I hope you don't expect your employer to have to administer income tax on your WIFE'S income - especially since she isn't employed by your employer?R.
Or do you think that a benefit in kind that has been obtained through your work should not be taxed in any way?
There's no doubt both me and my wife appreciate the considerable benefit we have of participating in my ex-company paid private medical plan and we fully accept that as a benefit in kind it should be subject to personal income tax. The issue I have is that the value of the benefit should be split between me and my wife so we each have our personal allowances and tax codes reflect our individual value of the benefit in kind. I simply don't see why I should have the whole lot impact my personal allowances etc whereas my wife's has no impact. Technically, I personally do not get any benefit by her participation but I do get the tax charge for what is no benefit to me, hence my grumble
R.
R.
Which is groundless.
It is because of YOUR employment that the benefit is paid so it is YOU that should be liable to any Income Tax arising on it.
From a purely practical point of view, how would HMRC assess your wife for the insurance? Through HER employment? Should she have to complete a Self Assessment tax return? How would HMRC be notified that she is receiveing a taxable Benefit in kind due to someone else's employment?
What if she weasn't in employment or had no source of income (not unusual for many wives). How would she be taxed then?
It is because of YOUR employment that the benefit is paid so it is YOU that should be liable to any Income Tax arising on it.
From a purely practical point of view, how would HMRC assess your wife for the insurance? Through HER employment? Should she have to complete a Self Assessment tax return? How would HMRC be notified that she is receiveing a taxable Benefit in kind due to someone else's employment?
What if she weasn't in employment or had no source of income (not unusual for many wives). How would she be taxed then?
The only way that HMRC knows about the private medical cover is because I declare it as a benefit in kind as required by HMRC's when completing my tax return. I need to get the cost each year from my ex employer and then declare that cost. I just think I should be able to divide the cost by two so that my wife and I each declare the cost to each of us and each pay our share of the tax due.
When I retired the continuation of private medical cover paid for by my ex employer was not considered a benefit in kind so there was no tax to pay. A couple of years or so later the then Labour government decided it was a benefit in kind and it should be taxed: fair enough. I just consider that as I get no benefit for my wife's participation I should not be paying the whole tax and as my wife does get the benefit she should be paying her share of the tax. When this was introduced I was required to certify to HMRC that I did or did not participate in such a plan so it has always seemed to me that as HMRC requires everyone to declare their income, all benefits in kind etc, each tax year then they will get all the details and all the tax due, assuming everyone declares everything, of course.
Between us we won't agree on this so let's simply agree to differ.
R.
R.
When I retired the continuation of private medical cover paid for by my ex employer was not considered a benefit in kind so there was no tax to pay. A couple of years or so later the then Labour government decided it was a benefit in kind and it should be taxed: fair enough. I just consider that as I get no benefit for my wife's participation I should not be paying the whole tax and as my wife does get the benefit she should be paying her share of the tax. When this was introduced I was required to certify to HMRC that I did or did not participate in such a plan so it has always seemed to me that as HMRC requires everyone to declare their income, all benefits in kind etc, each tax year then they will get all the details and all the tax due, assuming everyone declares everything, of course.
Between us we won't agree on this so let's simply agree to differ.
R.
R.
EricMc,
The cost of the medical insurance is paid for my ex employer from which I retired. In effect, it's a post retirement medical plan provided by the ex employer and available to all its ex employees, being an extension of the plan available when employed. At the time I retired I had to make a decision as to whether I wanted to stay in it or not...a no brainer, of course! For all employees and ex employees cover can be arranged for the employee only, for employee and spouse, and for employee and family, the decision being the employee's. I opted for the employee and spouse cover.
It's a nice package for me and my wife to have, although my income tax on it has increased significantly in line with the cost of the cover to the ex employer, once the then Labour government made it taxable some years ago. The tax started at £0, and for the tax year 2012/13 I calculate my actual tax on the company cost will be £1390. I don't object to the principle of there being a tax liability and my wife and I are content to pay it but I do object to the way it operates against me and not against her at all, which I consider to be unfair.
I'm aware that there are many similar plans in operation throughout the UK. I'm not saying that they are universal, of course.
R.
The cost of the medical insurance is paid for my ex employer from which I retired. In effect, it's a post retirement medical plan provided by the ex employer and available to all its ex employees, being an extension of the plan available when employed. At the time I retired I had to make a decision as to whether I wanted to stay in it or not...a no brainer, of course! For all employees and ex employees cover can be arranged for the employee only, for employee and spouse, and for employee and family, the decision being the employee's. I opted for the employee and spouse cover.
It's a nice package for me and my wife to have, although my income tax on it has increased significantly in line with the cost of the cover to the ex employer, once the then Labour government made it taxable some years ago. The tax started at £0, and for the tax year 2012/13 I calculate my actual tax on the company cost will be £1390. I don't object to the principle of there being a tax liability and my wife and I are content to pay it but I do object to the way it operates against me and not against her at all, which I consider to be unfair.
I'm aware that there are many similar plans in operation throughout the UK. I'm not saying that they are universal, of course.
R.
Yes. My working life spanned 45 years, 33 of which were with my last employer. I get a pension from the pension plan via the trustees, who supply my annual P60, and the medical plan from my ex employer. That's two different entities so it probably explains why HMRC don't seem to pick up the information about the medical plan other than from me.
R.
R.
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