Adding a private medical insurance (PMI) scheme to PayFit helps track your benefits and report them to HMRC. Employees can view the cost of their employer-provided benefits and their contributions to the scheme, directly on their payslip.
Feature overview
✅ Monthly private medical insurance premiums appear as a Benefits value under the employer costs section of the payslip.
✅ Employee contributions towards the scheme show as a deduction on the payslip.
✅ Private medical insurance schemes can be processed monthly, or annually at the end of the tax year.
✅ You can separate employee contributions towards dependents as a separate deduction on their payslip.
✅ PayFit can generate and submit your P11Ds and P11D(b) to HMRC.
✅ Private medical insurance can be added per employee or in bulk.
✅ Make corrections to payrolled private medical insurance when an employee leaves the scheme mid-month or mid-year.
Note: PayFit supports reporting PMI either monthly or annually, but not both at the same time. If one scheme requires monthly values, both schemes must be set up monthly.
Enable PMI as a benefit
From the left, choose Company settings, then Benefit settings.
Under the General settings section, click Set benefits preferences.
Answer each of the questions, then click Save.
From the left, choose Company settings, then Benefit settings.
Under the General settings section, click Activate benefits schemes.
Enable Private medical insurance, then click Save.
Set up a PMI scheme
From the left, choose Company settings, then Benefit settings.
Under the Private medical treatment or insurance section, click Set scheme preferences.
Enter the scheme name(s), e.g., Vitality, Bupa.
For each scheme, select whether the scheme is payrolled, i.e. the employee pays tax in real-time through the payroll or if it is reported via P11d at the end of the year.
If your employees contribute towards the scheme, you should choose the monthly option.
If you need to add a second scheme, you can toggle the option to set up a second private medical or insurance scheme.
Note: You must be formally registered with HMRC to payroll benefits.
Adding employees to the PMI scheme
From the left, choose Benefits in kind, then Private medical treatment or insurance. If you only have private medical insurance enabled, simply choose private medical treatment or insurance from the left.
Follow the instructions below depending on whether you'd prefer to add employees to the scheme one at a time, or in bulk.
Tip: If your employees contribute towards the scheme or your PMI schemes are payrolled, you need to enter the values on a monthly basis.
Adding employees one at a time
You can enter values for employees as either Monthly values or Annual values:
Monthly values
1. From the Table view drop-down, choose Monthly values.
2. Use the Search for an employee box to find the relevant employee.
3. In the table below, next to the employee's name, click Edit.
4. Toggle on the Subscribe <employee name> to Private medical insurance scheme option.
5. In the Employer cost field, enter the full employer premium, i.e. the total amount paid to the PMI provider.
6. If the employee contributes towards the cost of the scheme, enter the Monthly amount contributed by employee.
This is displayed as a deduction on the employee's payslip.
7. If the employee pays towards the cost of including dependents in their PMI scheme, toggle on the Employee is also contributing towards dependents, then enter the Number of dependents and Monthly amount contributed per dependent.
Tip: If you don't know the cost per dependent, enter the number of dependents as 1, with the total monthly amount contributed towards all dependents.
This is displayed as a separate deduction on the employee's payslip.
8. Click Save.
Annual values
1. From the Table view drop-down, choose Year-To Date values.
2. Use the Search for an employee box to find the relevant employee.
3. In the table below, next to the employee's name, click Edit.
4. Toggle on the Subscribe <employee name> to Private medical insurance scheme option.
5. In the Year-To-Date employer cost field, enter the full employer premium for the tax year.
6. Click Save.
Adding employees in bulk
Choose whether you'd prefer to enter monthly values or Annual values below.
Monthly values
1. From the Table view drop-down, choose Monthly values.
2. Click Edit monthly values.
3. Click Download a template.
4. Complete the downloaded template as follows:
Tip: You can delete employees from the template if you don't want to include them, or you can leave them on the template with no changes.
Column A - ID: Do not change
Column B - Name: Do not change
Column C - Subscribe to PMI: Enter Yes.
Column D - ER cost: Enter the full PMI premium for the month. This includes any costs of dependents. It's the total value that both employer + employee pay every month.
Column E - EE cost: Employee's contributions to be deducted via the payroll (net deduction, after tax and national insurance).
5. Save and close the template, then drag and drop it into the 2. Upload your filled-in file page.
6. Click Import data, then Yes, finish import.
Annual values
1. From the Table view drop-down, choose Year-To-Date values.
2. Click Edit yearly values.
3. Click Download a template.
4. Complete the downloaded template as follows;
Tip: You can delete employees from the template if you don't want to include them, or you can leave them on the template with no changes.
Column A - ID: Do not change
Column B - Name: Do not change
Column C - Subscribe to PMI: Enter Yes.
Column D - Year-To-Date employer cost: Enter the full PMI premium for the tax year.
5. Save and close the template, then drag and drop it into the 2. Upload your filled-in file page.
6. Click Import data, then Yes, finish import.
Making corrections to private medical insurance
PayFit allows you to make corrections to private medical insurance processed at any time within the tax year. This is useful for situations such as missed changes or cancelled subscriptions. Corrections can be made to benefits payrolled or reported on a P11D.
To correct private medical insurance
From the employee's record, click Pay items.
Under the Benefit in kind section, next to the relevant private medical insurance scheme, click Edit.
If the subscription has been cancelled, toggle off the Subscribe to private medical insurance option.
Toggle on the Amend subscription in the past option.
Enter the date that the subscription ended or needs to be amended.
The amount is calculated automatically. If it's incorrect due to a mid-month change, enter the differences into the boxes below then click Save.
Note: You must enter the difference between the amount calculated in PayFit and the correct amount.
Example: The total employer cost is calculated as £85, but it should be £65, enter £20. Or if it should be £100, enter -£15.
The values appear immediately on the employee's payslip. Employee contributions appear under the deduction section, while employer costs are displayed as Benefits in the employer contribution section in the top-right.
Frequently asked questions
How is PMI displayed on the employee's payslip?
The employer costs are displayed in the Employer costs section, as Benefits, in the top-right of the payslip. This value includes other benefits too, such as gym memberships.
Any amount that the employee contributes towards the scheme shows as the PMI description name (e.g. Vitality) in the deductions section.
Can an employee contribute towards PMI using salary sacrifice?
Some private medical insurance schemes may qualify for salary sacrifice arrangements. It's important to check with HMRC or your PMI provider to confirm whether the scheme is eligible.
In eligible schemes, employees can contribute towards their own PMI through salary sacrifice, which offers employee National Insurance (NI) savings. These contributions are deducted before tax and NI, lowering the employee’s NI liability. However, because these contributions aren't taxed, they don't reduce the taxable value of employer-provided PMI benefits. The taxable benefit remains the full cost paid to the provider.
When entering the value of the benefit in PayFit, you must disregard any salary sacrifice contributions. Enter the full cost of the private medical insurance as the benefit value, as this is the taxable amount.
Any salary sacrifice contributions made by employees should be added as a gross deduction via the Pay Items tab. These contributions may cover:
The employee’s share of their PMI premium.
Contributions towards dependents covered under the policy.
As an example, the employer pays a total of £100 to Vitality each month, the employee contributes £25 deducted as a salary sacrifice deduction entered within the Pay Items tab. The full £100 is entered as an employer cost, with no employee contributions deducted after tax.
How do I calculate the employer cost?
The employer cost is the total value paid to the PMI provider, including the employee's contributions towards their own scheme, or the cost of their dependents.
The value that is then payrolled, or included on the P11D, is calculated as the employer cost, minus any contributions made by the employee. Contributions made by the employee must be deducted after tax so they can be reported as an amount 'made good'. This means the employee has paid tax on this amount already, so doesn't need to pay tax again. The remaining cost of the benefit is what is left to pay tax on.
As an example, the employer pays a total of £100 to Vitality each month, and the employee contributes £25, which is entered as an employee contribution within the Benefits section of the app, so is deducted after tax.
On the P11D, the total benefit amount is reported as £100. The amount made good is reported as £25, and the taxable value is the remaining £75.
For a payrolled benefit, the employer contribution section on the payslip shows the remaining £75, and the employee pays tax on the additional £75 per month.