Can I offer health insurance to some employees but not all?

Yes. You can set eligibility criteria such as job grade, length of service (e.g. after probation), or employment type (permanent staff only). However, criteria must be clear and non-discriminatory. Many SMEs start by covering directors and senior staff, then expand.

Small Business Health Insurance UK 2026 | PMI for Small Companies

Key Facts: Small Business Health Insurance

Small business health insurance (private medical insurance) provides faster access to private healthcare for your team, reducing sick days and boosting retention.

-Small business PMI typically costs £500-£1,500 per employee per year

-Premiums are corporation tax deductible as a business expense

-P11D benefit-in-kind charge applies — employees pay tax on the benefit

-Policies can cover as few as 2 employees (some providers accept 1)

-Average UK wait for NHS treatment was 14 weeks in 2024 (NHS England)

-Employees consistently rank health insurance in the top 3 most valued benefits

What Is Small Business Health Insurance?

Small business health insurance — also called private medical insurance (PMI) or corporate healthcare — provides your employees with access to private medical treatment. This means faster diagnosis, shorter waiting times, and access to private hospitals and specialists.

According to ABI data, the UK private medical insurance market covers over 4 million people through employer-sponsored schemes. For small businesses, offering health insurance is one of the most effective ways to compete with larger employers for talent.

The FCA regulates all health insurance products in the UK, ensuring fair treatment and transparent pricing.

Core PMI Cover

In-patient treatment, day-patient surgery, specialist consultations and diagnostic tests. The foundation of any business health insurance policy. Covers most common conditions requiring private treatment.

Out-Patient Cover

GP referrals, specialist consultations, scans (MRI, CT) and physiotherapy without hospital admission. Adds significant value but increases premiums by 20-40%.

Mental Health Cover

Counselling, psychiatric consultations and mental health treatment. Increasingly included in business health policies. Important given the rising prevalence of workplace stress and anxiety.

Dental & Optical

Usually offered as add-ons rather than core cover. Covers routine check-ups, treatment and glasses/contact lenses. Relatively inexpensive to add but valued by employees.

Tax Treatment of Small Business Health Insurance

Understanding the tax implications of small business health insurance is important for both the employer and employees. The GOV.UK expenses and benefits guidance outlines the rules. HMRC Employment Income Manual (EIM21765) provides detailed P11D treatment. The CIPD reports that PMI remains one of the top 3 most valued employee benefits:

Corporation Tax Deductible

PMI premiums are deductible as a business expense against corporation tax. At 25% CT rate, a £1,000 annual premium effectively costs the company £750 after tax relief.

P11D Benefit-in-Kind

Unlike relevant life insurance, PMI creates a P11D charge. Employees pay income tax on the premium value. A £1,000 premium costs a 20% taxpayer £200/year in extra tax, or £400 for a 40% taxpayer.

Employer NI on BIK

The employer pays 13.8% Class 1A NI on the benefit value. On a £1,000 premium, that is £138 per employee per year in additional employer NI.

Despite BIK, Still Tax-Efficient

Even with the P11D charge, company-paid PMI is more tax-efficient than paying employees enough extra salary to buy their own private health insurance. The company saves on the salary alternative.

Comparison with Life Insurance

Note that <a href='/relevant-life-insurance'>relevant life insurance</a> has NO P11D charge, making it the most tax-efficient employee benefit. Consider offering both for a comprehensive benefits package.

Small Business Health Insurance vs Key Person Insurance

Health Insurance vs Key Person Insurance

Key Person Insurance

Key person insurance: Pays the company a lump sum if a key individual dies or gets a critical illness. Protects the business from financial loss. One-off payout.

Other Product

Health insurance: Provides ongoing access to private medical treatment for employees. Reduces sick days, speeds recovery, aids retention. Ongoing benefit, not a one-off payout.

When you need it: They serve completely different purposes. <a href='/keyman-insurance'>Key person insurance</a> protects against catastrophic loss; health insurance improves day-to-day employee wellbeing and productivity. Most businesses benefit from both.

Health Insurance vs Relevant Life Insurance

Key Person Insurance

Relevant life: Death-in-service benefit. No P11D charge. Payout goes to family if the employee dies. The most tax-efficient employee benefit available.

Other Product

Health insurance: Ongoing medical cover. P11D charge applies. Provides value while the employee is alive and working. Directly reduces absenteeism.

When you need it: Offer <a href='/relevant-life-insurance'>relevant life insurance</a> first (no P11D, most tax-efficient), then add health insurance as a second-tier benefit. Together they form a compelling employee benefits package.

How to Set Up Small Business Health Insurance

Getting small business health insurance in place is straightforward:

Determine who to cover — All employees, directors only, or senior staff. You can set eligibility criteria (e.g. after probation period, certain job grades).
Choose your cover level — Core (in-patient only) is cheapest. Comprehensive (in-patient + out-patient + mental health) is most valued by employees.
Compare providers — Major UK business health insurers include Bupa, AXA Health, Aviva, Vitality and WPA. Premiums vary significantly.
Consider excess levels — Higher excesses (e.g. £250-500 per claim) reduce premiums. Company-paid or employee-paid excess is a design choice.
Bundle with other protection — Consider combining with relevant life insurance, business life insurance and key person insurance for comprehensive business protection.

Small Business Health Insurance: UK Market Data

£170+

Average CPC for small business health insurance

Source: DataForSEO March 2026

KD 3-11

Keyword difficulty — very low organic competition

Source: DataForSEO March 2026

14 weeks

Average NHS wait time for treatment in England

Source: NHS England RTT Data 2024

4m+

UK people covered by employer-sponsored PMI

Source: ABI Health Insurance Data 2024

£500-1,500

Typical annual cost per employee for SME PMI

Source: Industry average 2024

25%

Corporation tax relief on PMI premiums

Source: HMRC 2025/26

Trusted Sources & Further Reading

This small business health insurance guide is informed by:

ABI PMI Data 2024 — Record £4bn in private medical insurance claims; 6.5m people covered
FCA Health Insurance Guide — Consumer rights and regulation
GOV.UK Medical Treatment Benefits — Tax treatment of PMI
HMRC EIM21765 — P11D treatment for medical insurance
CIPD Health & Wellbeing Report — 7.8 sick days per employee per year
NHS England Waiting Times — Current NHS treatment delays
Federation of Small Businesses — SME resources
MoneyHelper Business Insurance — Independent guidance

Small Business Health Insurance FAQs

How much does small business health insurance cost?

Typical costs are £500-£1,500 per employee per year for core PMI, or £1,000-2,500 for comprehensive cover. Costs depend on employee ages, cover level, excess amount, and claims history. After 25% corporation tax relief, the effective cost is 25% lower.

Is small business health insurance tax deductible?

Yes, premiums are corporation tax deductible. However, PMI creates a P11D benefit-in-kind charge for employees, who pay income tax on the premium value. The employer also pays 13.8% Class 1A NI on the benefit. Despite this, company-paid PMI is still more tax-efficient than salary alternatives.

How many employees do I need for business health insurance?

Most PMI providers accept business schemes with as few as 2-3 employees. Some will cover sole directors through corporate policies. For one-person companies, individual PMI or company-paid personal health insurance is an option.

Is small business health insurance worth it?

Small Business Health Insurance UKPrivate Medical Insurance for SMEs