Both routes work, and the gap is smaller than commonly claimed. A company-paid £1,000 premium gets corporation tax relief but adds 15% Class 1A NIC and benefit-in-kind tax; paying personally takes £1,096 of dividends at basic rate, £1,509 at higher. At 25% corporation tax the company route generally wins; at 19% it's close to a wash.
- ✓At 25% corporation tax, the company route generally beats paying from dividends.
- ✓At the 19% small profits rate the routes land within a few percent — sometimes personal edges it.
- ✓A sole director can still put cover through the company — no second employee needed.
The two routes, stated plainly
Route A — the company pays. The premium is generally an allowable expense for corporation tax. The company also pays Class 1A National Insurance at 15% on the premium value (also deductible), and you pay income tax on the premium as a benefit in kind at your marginal rate, reported via P11D until payrolling becomes mandatory in April 2027.
Route B — you pay personally. No BIK, no Class 1A, no P11D. But for most owner-directors the money arrives as dividends, which are paid from post-corporation-tax profit and get no relief — and you pay dividend tax before the premium ever leaves your account. That double layer is what Route A avoids; the BIK and Class 1A are what it costs instead. The question is which set of taxes is smaller.
The £1,000 worked example
Take a £1,000 annual premium. Here's what each route consumes, at basic and higher rate, using 8.75% and 33.75% dividend tax and assuming the dividend allowance is already used elsewhere. All figures indicative.
| Route A: company pays | Route B: personally, from dividends | |
|---|---|---|
| Premium | £1,000 | £1,000 |
| Class 1A NIC at 15% | £150 | — |
| Corporation tax relief on £1,150 | −£219 at 19% / −£288 at 25% | None — dividends aren't deductible |
| Net cost to the company | £931 / £862 | — |
| Director's BIK income tax | £200 basic / £400 higher | — |
| Dividends needed to leave £1,000 after dividend tax | — | £1,096 basic / £1,509 higher |
To compare fairly, fund the Route A BIK tax with extra dividends too, and count everything in post-corporation-tax company cash. Route A then totals roughly £1,150 (basic) / £1,535 (higher) at 19% corporation tax, and £1,081 / £1,466 at 25%. Route B is £1,096 / £1,509 regardless of corporation tax rate — the dividend figures above. (The 19% figures use the small profits rate; companies with profits in the marginal band get relief at an effective 26.5%, which flatters Route A further.)
Who wins, band by band
Putting those totals side by side gives the honest answer most articles skip:
| Your position | Cheaper route | Indicative margin on £1,000 |
|---|---|---|
| Basic-rate director, 19% corporation tax | Personal — just | ~£55 |
| Basic-rate director, 25% corporation tax | Company — just | ~£15 |
| Higher-rate director, 19% corporation tax | Near wash | ~£25 to personal |
| Higher-rate director, 25% corporation tax | Company | ~£45 |
| Profits in the 26.5% marginal band | Company, more clearly | £30–£60 by tax band |
The pattern: the more corporation tax relief is worth — 25% main rate, or the 26.5% marginal band between £50,000 and £250,000 of profits — the more the company route pulls ahead. At the 19% small profits rate the 15% Class 1A largely cancels the relief, and the two routes converge to within a few percent of each other.
Compare director cover both ways
What the pure maths leaves out
- Group pricing needs the company route. With 2+ people on payroll — a co-director, a spouse, an employee — a genuine group scheme typically prices 10–30% below individual cover. A pre-tax discount that size beats every tax margin in the table above.
- Cash flow and headroom. Route A needs the premium in company funds; Route B needs distributable profits and dividend headroom. In a lean year, one of those is usually easier than the other.
- Admin. Route A means a P11D each July and a Class 1A payment by 22 July — see our P11D deadlines guide. An hour a year, but a real hour, and penalties if forgotten.
- Renewal drift. Premiums rise with age and claims. A route that's a £50 win on £1,000 today scales with the premium — worth re-running the sums when cover hits £2,000+.
- Family cover. If the company pays for your partner and children, the whole premium is generally BIK on you; the company still generally gets relief on all of it.
- The salary route exists too — and usually loses. Funding the premium through extra salary attracts employer and employee NIC on top of income tax, which is why the real contest is company-versus-dividends.
One-director companies: yes, this works for you
You don't need a team, or even a second employee. A limited company with a single director can pay for that director's health insurance: the policy is often written as an individual plan paid by the company, and a couple of insurers offer formal group-of-one arrangements. The tax mechanics are exactly as above — generally deductible for the company, BIK for you, Class 1A for the company.
For a typical contractor or consultant paying themselves a small salary and dividends, with profits in the 25% or marginal band, the company route is usually the default that makes sense — and it has the pleasant side effect of the company funding your consultation-in-days, scans-in-1–2-weeks access while the NHS median wait sits at 12.4 weeks. If your profits sit under £50,000, run both quotes and both sums; the winner is genuinely not obvious. Our tax deductibility guide and business cost guide cover the rest of the picture.
Frequently asked questions
Is it better for a director to pay for health insurance through the company or personally?
It depends mainly on your corporation tax rate. At 25% (or the 26.5% marginal band) the company route generally wins; at the 19% small profits rate the routes land within a few percent and paying personally from dividends can edge it. Run both sums on your own numbers.
How much does a £1,000 health insurance premium really cost through a limited company?
Roughly £1,081–£1,150 all-in for a basic-rate director (depending on corporation tax rate) once you net corporation tax relief against Class 1A NIC at 15% and benefit-in-kind tax at 20%. A higher-rate director's all-in figure is roughly £1,466–£1,535. Indicative, not tax advice.
What tax does a director pay on company-paid health insurance?
Income tax on the premium as a benefit in kind, at your marginal rate — £200 a year on a £1,000 premium at basic rate, £400 at higher rate — usually collected through an adjusted tax code. The company separately pays Class 1A National Insurance at 15% of the premium.
Can a company with only one director get health insurance through the business?
Yes. A sole-director company can pay for the director's cover — typically an individual policy paid by the company, and some insurers offer group-of-one arrangements. The premium is generally deductible for corporation tax, with BIK for the director and Class 1A NIC for the company.
Does a director paying health insurance from dividends save the P11D admin?
Yes — a personally-paid policy involves no benefit in kind, so no P11D, no P11D(b) and no Class 1A. That simplicity is worth something, particularly for companies without an accountant on retainer. Whether it's cheaper overall depends on your corporation tax rate and tax band.
Why does the corporation tax rate change which route wins for director health insurance?
Because relief is the company route's whole advantage. At 25% or the 26.5% marginal band, relief on the premium and Class 1A comfortably outweighs the BIK cost. At 19%, relief only just offsets the 15% Class 1A — leaving the BIK tax to compare against dividend tax, which it roughly matches.
Is health insurance through a limited company tax deductible for the director's family too?
Generally yes for the company — premiums covering a director's partner and children are normally still an allowable expense. But the full family premium then counts as the director's benefit in kind, so the BIK tax grows with the family cover. Some directors pay dependants' cover personally instead.
Should a director take a group scheme or an individual policy through the company?
If you have two or more people on payroll — including a spouse or co-director — always price the group scheme: group rates typically run 10–30% below individual cover, a bigger saving than any tax margin. A genuinely solo director takes an individual policy paid by the company.
Do the director health insurance sums change after payrolling starts in April 2027?
The amounts barely change; the mechanics do. From April 2027 the benefit is taxed through payroll in real time instead of via P11Ds, so the company route loses its annual forms but not its Class 1A cost. The company-vs-personal comparison itself is essentially unaffected.
Can a director's company pay for health insurance instead of a salary rise?
It can, and it's often tax-efficient: £1,000 of premium reaches the director as cover at an all-in cost similar to or below £1,000 of extra gross pay, while buying private consultations within days. It's a benefit, though — it doesn't build pension entitlement or mortgage-assessable income.