BUPA Tax Implication

Hello,
I'm a US citizen, living and working in the UK (on an EEA Family Permit). My employer has offered private medical coverage through BUPA, and I understand the annual cost, and the amount I'd be taxed at the end of the tax year. What I'd like to know is: are one's tax liabilities usually offset  by deductions and adjustments (similar to how it's done in the US)?
I debating whether or not it's worth it to assume the additional cost for private medical insurance, and whether I'd be likely to pay taxes out of pocket when I file, because I've added the cost of BUPA to my tax liability.

Any assistance would be greatly appreciated.

Thanks,
Al

In the US, health insurance provided by an employer can normally be excluded from your income (although note the conditions that apply, and be aware that insurance you purchase yourself is not excludable).

Not a tax professional, but one common sense view would be that you apply the same set of rules to any BUPA or similar cover you receive while working in the UK.

EDIT: This of course can only help you under the US tax system. It will not excuse you from paying UK income tax on the value of your BUPA cover. Whether the value of BUPA is worth the added tax cost is a personal decision for you.

What I'd like to know is: are one's tax liabilities usually offset  by deductions and adjustments (similar to how it's done in the US)?
I debating whether or not it's worth it to assume the additional cost for private medical insurance, and whether I'd be likely to pay taxes out of pocket when I file, because I've added the cost of BUPA to my tax liability.

Sorry may have misunderstood your question earlier so let me offer some additional thoughts.

You haven't provided enough information to determine whether you might have other UK deductions that would offset the tax on your BUPA cover, but you would almost certainly have those deductions regardless of whether you take the insurance, so it's a moot point. It sounds like you know how to determine the amount by which your UK income tax would increase so the only question you need to answer for yourself is whether you feel that's a price worth paying. If you do then end up with a tax bill at the end of the year, HMRC can normally collect it through your tax code gradually throughout the year so you don't have to pay it all at once.

Unless you have some expectation of 'going private' for a procedure, why bother paying for BUPA? Personally, I wouldn't even consider it.

Ok, I have a newbie question related to this. My hubby is being offered a BUPA policy that we are seriously considering as I have a serious medical condition, and having private care may come in handy.

Now I'm completely unfamiliar with taxes here in the UK, but I'm inferring from the posts above that him signing up for this policy will increase the taxes we have to pay? How much is the typical impact? Are we talking hundreds of GBP here?

Now I'm completely unfamiliar with taxes here in the UK, but I'm inferring from the posts above that him signing up for this policy will increase the taxes we have to pay? How much is the typical impact? Are we talking hundreds of GBP here?

If he is on PAYE (his taxes are taken out of his pay each month automatically), then the relevant amount of tax from the health insurance will be deducted from his payslip each month, under the company benefits section.

I believe what happens is that the amount of the health insurance is taken off your tax-free allowance for the year, so you end up with a slightly lower threshold of tax-free income... and then you are taxed on the value of the health insurance as well as your salary.

It depends on the cost of the health insurance plan, but I can't imagine that it would be hundreds of pounds of tax, since you would only pay a percentage in tax on the full annual insurance amount... and the health insurance is unlikely to cost more than a few hundred pounds per year in total (maybe £600-1,000 per year and the tax I would guess would be about 20% of that - of course it depends how on the salary and how it's all calculated).

See here for more info: http://www.hmrc.gov.uk/incometax/codes-company-benefits.htm

Ok, I have a newbie question related to this. My hubby is being offered a BUPA policy that we are seriously considering as I have a serious medical condition, and having private care may come in handy.

Now I'm completely unfamiliar with taxes here in the UK, but I'm inferring from the posts above that him signing up for this policy will increase the taxes we have to pay? How much is the typical impact? Are we talking hundreds of GBP here?

Just to add to ksand24's reply:

A private health insurance policy given to an employee by the company is treated as a "benefit in kind" by HMRC. As ksand24 mentions, it is assigned a value (check with the company or other workers to determine the amount). It is reflected on your Tax Code and on your P11D (end of year statement for your employer). If you pay tax in the 20% bracket, the value of the benefit will be taxed at 20%. If in the 40%, then it will be taxed at 40%.

(ksand24's link was better, so I've deleted this.)

If I remember correctly, many years ago before I retired, an AXA full coverage policy was valued at about £450/year (it was a large company, therefore it may have been cheaper). No idea what they are valued at now.  

Ok, how do we know if he will owe money to HMRC at the end of the tax year? From my understanding you don't have to file taxes here, unless you think you'll owe? Damn I think I have some homework to do on understanding filing/doing taxes here.

Ok, how do we know if he will owe money to HMRC at the end of the tax year? From my understanding you don't have to file taxes here, unless you think you'll owe? Damn I think I have some homework to do on understanding filing/doing taxes here.

In general, you don't owe at the end of the year because your taxes should be correct each month anyway... so the majority of people on PAYE won't owe anything (although some people recommend that you should file anyway just in case - I've never bothered myself).

If you think the tax on your payslips might be wrong, you can just call the tax office and they will sort it out right away, changing your tax code and giving you a refund or deducting any tax from you that you haven't paid.

This happened to me a few years ago - I realised in June of 2006 that I had been on the wrong tax code for 11 months and had paid almost £2,000 too much in tax... so I called the tax office and they changed my tax code immediately... and 4 weeks later I received a cheque from them for £1,500... then for the next 6 months I received tax credit in my payslip each month until the full amount was paid back to me.

Also when I was a student, I was working in the school holidays and was paying tax when I shouldn't have been (as I wasn't working in term-time), so at the end of each summer, I just sent off my P45 (from the job I'd left) to the tax office and they sent me a tax refund a few weeks later.

In general, you don't owe at the end of the year because your taxes should be correct each month anyway... so the majority of people on PAYE won't owe anything (although some people recommend that you should file anyway just in case - I've never bothered myself).

If you think the tax on your payslips might be wrong, you can just call the tax office and they will sort it out right away, changing your tax code and giving you a refund or deducting any tax from you that you haven't paid.

Interesting. How would we know if either of us is on the wrong tax code? I just checked my OH's payslip to see that he is on a 944L tax code - which appears to be an emergency tax code (which makes sense since we just moved back here). When you are on an emergency code, is less or more tax taken out?

Methinks I could ask lots more questions about this topic, so maybe I should create my own thread, instead of hijacking this one. Sorry OP!

More is taken out on an emergency code. 

Interesting. How would we know if either of us is on the wrong tax code? I just checked my OH's payslip to see that he is on a 944L tax code - which appears to be an emergency tax code (which makes sense since we just moved back here). When you are on an emergency code, is less or more tax taken out?

Methinks I could ask lots more questions about this topic, so maybe I should create my own thread, instead of hijacking this one. Sorry OP!

I don't think that's an emergency code.  I believe the emergency codes usually end in a T, but if your hubby calls HMRC they'll ensure he's on the correct one and it'll correct in the next paycheck as Ksand said.

I just signed up for Bupa my tax was adjusted and my paycheck dropped by £7 a month, so over the year I'm paying £84.  It'll be different for everyone but I plan to use the private coverage a bit this year.

one little point about paying UK tax. If a person is in the 40% uk tax bracket, even if their paye is correct, there's one situation in which they're supposed to file - if you got interest in any kind of bank account, UK (or otherwise). The UK banks only deduct 20% and then you're supposed to file to declare the other 20%. So if you have #100 in a savings account, the bank deducts #2 and you have to file to declare the other #2. (And once you file, they'll send you a form every year.) No one does, that I ever heard of.

sorry I got the example wrong. It should be: if you have #100 in interest, the UK bank will deduct #20 and you're supposed to file to pay the remaining #20. (there are however tax free ISA savings accts)