If you’re self-employed, in the creative industries for example, then the freedom of being your own boss means you’re responsible for everything – including the healthcare of your employee (you).
Health insurance is a crucial safety net, but unlike salaried employees, the question of claiming back costs from HMRC becomes more complex.
The most common scenario is a standard health insurance policy that covers things like hospital stays and specialist consultations. So, while you may think these are issues which prevent you from earning money, unfortunately, HMRC considers these expenses personal and not directly related to running your business. That means that the premiums paid for these policies wouldn’t be deductible from your taxable profits.
The taxman’s logic is that this type of health insurance protects your general well-being, not your ability to work. While staying healthy is undoubtedly good for business, this distinction is key, if perhaps unfair.
There’s a glimmer of hope, though. A specific type of health insurance, designed for business purposes, might offer some room for claiming back costs. These specialised policies typically go beyond standard medical coverage. They might include benefits directly linked to your ability to generate income, such as:
- Income Protection: This benefit replaces a portion of your income if you’re unable to work due to illness or injury.
- Critical Illness Cover: This provides a lump sum payout if you’re diagnosed with a critical illness, helping with financial burdens during a difficult time.
It’s never straightforward though, is it? And here’s where things get a little tricky. Even with a business health insurance policy, HMRC only allows claiming a deduction for the portion of the premium that covers benefits directly related to your business. They will meticulously examine your policy details to ensure this.
For instance, if your policy offers a mix of benefits – income protection, standard medical coverage, and dental care – you might only be able to claim a portion of the premium corresponding to the income protection element.
So, how do you navigate this complex landscape and maximise your claims? Here are some practical steps:
- Consult a Tax Advisor: Yes, we would say this but we can dissect your specific business health insurance policy and advise on the deductible portion of the premium.
- Scrutinise Your Policy: Before claiming, thoroughly review your policy wording. Identify clearly defined business-related benefits like income protection.
- Maintain Records: Again, we always say this, but keep all your health insurance documents, invoices, and receipts. These will be essential if HMRC requests proof of your claims.
- HMRC Guidance: While they may not be answering the phone much, a, HMRC offers resources on allowable business expenses.
While claiming back some costs is a welcome benefit, don’t let tax deductions be the sole reason for having business health insurance. Insurance is a key financial safety net, so don’t let the tax disadvantages dissuade you from getting the cover that we hope you don’t need.
But to get full value and some extra value from the tax people, get in touch.
