Healthcare benefits for contractors

Many permanent employees have access to health or medical cover as part of their employment package. But if you’re self-employed, can you (and should you) pay for things like healthcare insurance, gym memberships and medical expenses through your limited company?AA043475(greyscale)

The answer is: “it depends”. Every contractor’s situation is unique, and the rules governing expenses can be quite complex.

The rule of thumb is that you may claim only for those expenses incurred wholly and exclusively for the purposes of running your business. Healthcare insurance, gym memberships and general medical expenses are not considered necessary for business purposes and cannot be claimed as business expenses.

You may, however, pay for these expenses directly via your limited company, although a benefit in kind liability will arise and tax will be payable.

This tax could be 20%, 40% or even 50%, depending on your other income.

In addition, your limited company will incur a Class 1A National Insurance charge of 13.8% on the amount paid for the insurance, membership or medical expenses.

There are a few exceptions to this rule. Eye tests, annual medical check-ups, health screenings and overseas medical treatments can be charged to your limited company with no tax charge. These are seen as legitimate business expenses. As a contractor, you can qualify for one health screening and one medical check-up per year. 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.

Benefits can be rather complicated so please speak to your accountant before you pay these via your limited company, to ensure you make the right decision. If you need any assistance or advice, or would like to form your own limited company, visit 1st Contact Accounting.

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