Tax-free health benefits

12 October 2022

There is no general tax exemption for employer-funded medical treatment.

advice : Tax

If you are an employer, it is crucial to think about yourself and your employees’ health. It is advisable to offer benefits to help employees spot any issues early and get back to full health if that happens. 

While the provision of private medical insurance (other than for employees working overseas) is a taxable benefit, the tax system contains several health-related exemptions.

Health screening and medical check-ups

Employees are eligible for one health screening and one medical check-up each tax year without triggering a charge under the benefit-in-kind legislation. For these purposes, a health screening assessment is an assessment to identify an employer who may be at risk of ill health, whereas a medical check-up is a physical examination of the employee by a health professional for determining the employee’s state of health.

The provision of additional health screenings or medical check-ups in the same tax year is taxable and must be notified to HMRC on the employee’s P11D.

Recommended medical treatment

There is no general tax exemption for employer-funded medical treatment. However, there is a dedicated exemption for medical treatment that meets the definition of ‘recommended medical treatment’ provided or paid for by the employer. 

This treatment is recommended by a health professional as part of occupational health services provided to the employee to help the employee retain employment or is provided to assist the employee in returning to work after a period of absence due to injury or ill health. 

The exemption is capped at £500 per tax year. If the cost of the treatment is higher than this, the employee is taxed on the excess. 

Overseas medical treatment and insurance

A tax liability arises for the provision of medical treatment, other than recommended medical treatment, provided to UK-based employees. However, there is no tax liability where an employer provides medical treatment outside the UK and the need for the treatment arose while the employee was overseas to perform the duties of the employment. The exemption extends to the provision of insurance against the cost of providing such treatment.

Eye tests and glasses

If an employer is required by regulations made under the Health and Safety at Work Act 1974 to provide an employee with an eye test, there is no tax liability on that test. If the test shows glasses and contact lenses are needed, these are also tax-free. 

However, the exemption is conditional on access to tests, and the provision of corrective appliances to those who need them is available to all employees to whom such tests must be provided.

Nothing on this page is intended to be or should be construed or taken as accountancy, investment, tax or any other kind of advice. We recommend individuals and companies seek professional advice on their circumstances and matters.