Is private health insurance
tax deductible?

No, not for yourself. Private health insurance for a sole trader is a personal cost, because it protects you rather than the business (GOV.UK). Private medical insurance you provide for employees is an allowable staff cost, but it is a taxable benefit for them (GOV.UK).

Private health cover is one of the most common personal costs sole traders hope to put through the business. For yourself, it cannot go through. For employees, it can: providing health insurance is part of paying people, and it is allowable, though the employee is taxed on it as a benefit.

Is private health insurance tax deductible?

The HMRC rule

A cost is only allowable if it is incurred wholly and exclusively for the business. Everyday living costs, health, appearance and leisure have a personal purpose, so they are not allowable even when they help you work. The rule comes from HMRC Business Income Manual BIM37007: wholly and exclusively, Staff expenses.

HMRC treats costs that serve a personal as well as a business purpose as not incurred wholly and exclusively for the business, and your own health is personal (expenses overview). GOV.UK explains that medical or dental treatment or insurance provided for employees is a benefit that you report and on which you pay Class 1A National Insurance (medical treatment). Benefits for employees are an allowable staff cost (staff expenses).

When you can claim it

• Private medical insurance you provide for employees.
• Class 1A National Insurance on that benefit.
• Health cover for a family member you employ, as part of a package that is commercial for the work.
• Occupational health checks and treatment required for a job, which have their own exemptions.

When you cannot

• Your own private health insurance as a sole trader.
• Health insurance for your partner or children who do not work in the business.
• Private treatment you pay for yourself.
• Dental plans for yourself.

What to claim instead

Your own health cover is paid from after-tax income. Some sole traders compare it with running a limited company, where the company can pay for a director's cover, but that is a taxable benefit for the director too, so the saving is usually smaller than it looks.

How to decide if you can claim it

1. Was it for the business? A cost is only allowable if you incur it wholly and exclusively for the business. If it also serves a personal purpose that cannot be separated, such as clothing that keeps you warm or a meal that keeps you going, HMRC disallows it.
2. Is part of it personal? Where a cost has a business part you can identify, such as the business calls on a phone bill or the business miles in a car, you claim that part and leave the rest out, on a reasonable basis you can explain.
3. Is it a running cost or something you keep? It is a running cost, so on the cash basis it counts when you pay it and on traditional accounting when you incur it. Nothing about it needs spreading over later years.
4. Is there a specific rule? For private health insurance, the deciding rule is personal costs: a cost is only allowable if it is incurred wholly and exclusively for the business. Everyday living costs, health, appearance and leisure have a personal purpose, so they are not allowable even when they help you work.

Worked example: an electrician and his apprentice

An electrician pays £1,100 a year for his own health insurance and £650 for a policy for his apprentice. His own £1,100 is personal. The apprentice's £650 is allowable, reported as a benefit in kind, and he also pays and deducts £97.50 of Class 1A National Insurance on it.

Why your own cover is personal

An expense is allowable only if it is incurred wholly and exclusively for the business. Health insurance protects your health, which benefits you as a person whether or not you work. Even if you argue that staying healthy keeps the business running, the personal benefit is intrinsic, so the cost fails the test.

Employee cover and benefits in kind

Health insurance for employees is part of their remuneration, so it is allowable like wages. For the employee, it is a benefit in kind, taxed on its cost to you. You either report it on form P11D after the year or payroll the benefit, and pay Class 1A National Insurance at 15% on its value.

Health checks and occupational health

Some health costs for employees are exempt from tax, such as one health screening and one medical check-up a year, and certain treatment recommended by an occupational health service to help an employee return to work, up to £500. These remain allowable for the employer.

Cover for relatives you employ

If your spouse or child works in the business, you can provide health cover as part of their package, but only where the total package is commercial for the work they do. Cover for the whole family, of which one member does a few hours of admin, would not pass that test.

Cash plans and staff wellbeing

Some employers offer health cash plans or employee assistance programmes instead of full insurance. For employees they are generally allowable costs; whether a benefit is taxable depends on what it provides. For yourself as a sole trader, the same personal-purpose test rules them out.

Income protection is different

Income protection insurance, which replaces your income if you cannot work, is also personal for a sole trader and not a business expense. Its pay-outs are then usually tax-free. Key person insurance, taken out by a business on an employee, follows different rules.

Where it goes on your return and in MTD

It is not an allowable expense, so it does not reduce your profit. Where your bookkeeping shows it as a business payment, record it as drawings, or include it and add it back as a disallowable expense on the full self-employment pages.

If your turnover was under £90,000, you can use the short self-employment pages (SA103S), which ask for a single figure for total allowable expenses rather than a box-by-box breakdown, and the full pages let you give just a total in box 31 too. The category still matters for your own records and for Making Tax Digital, where each quarterly update uses the same categories unless you choose to send one consolidated figure.

The accounting basis changes when a cost counts. On the cash basis, the default for sole traders since 2024/25, it counts when you pay it; on traditional accounting, when you incur it, with things you keep claimed through capital allowances.

How much an allowable cost saves

An allowable expense does not come back to you in full: it reduces your profit, so it saves tax at your marginal rate. For a sole trader in England, Wales or Northern Ireland that is 26p in the pound at the basic rate (20% Income Tax plus 6% Class 4 National Insurance) and 42p at the higher rate. The sole trader tax calculator works out the figure for your own profit.

Records to keep

Keep policy documents showing who is covered. For employees, keep the P11D or payrolled benefit records and Class 1A calculations.

If Making Tax Digital for Income Tax applies to you (qualifying income over £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028), the records must be digital, and each quarter's costs go into a quarterly update. Check your date with the MTD requirement checker.

Common mistakes

• Claiming your own health insurance as a business expense.
• Providing staff health cover without reporting the benefit.
• Including family members who do not work in the business.

Related expenses

This item sits in the wages, salaries and other staff costs category, alongside childcare, employer’s National Insurance, pension contributions, staff Christmas parties and events, staff gifts and trivial benefits and wages, including family wages. The A to Z of expenses answers the same question for every other cost.

If you record your costs in TapTax, each one lands in the HMRC category it belongs to, with its receipt attached, so your quarterly updates and year-end return use the same figures.