Paying for private healthcare: your options

Financial planning
Views & insights

Find out how to draw money from your savings and investments to help self-fund private healthcare treatment


20 December 2023 | 3 minute read

If you’re one of the growing number of people looking to self-fund private healthcare, it’s important to consider how to draw money from your savings and investments in a way that doesn’t diminish your financial security.

While this may be a difficult and anxious time, rushing into a decision could create an undue tax burden or prevent your savings from lasting as long as you intended.

Your financial adviser will be able to recommend the best course of action for you, but the following information should help you get started.

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Self-funding explained

Self-funding, or self-pay as it is sometimes called, means paying for your own private healthcare without using medical insurance.

According to the latest available figures1, more than 272,000 people chose to self-fund private treatment in 2022, an increase of 37% from 2019. The number of self-funded hip and knee replacements, two of the most common procedures, soared by more than 70%.

With hip and knee replacements in the UK costing more than £12,000 on average2, and as much as £16,000 in some areas, the way in which you pay for treatment needs to be carefully considered.

Using cash savings

The simplest way to pay for private healthcare is to use cash savings. This could be a particularly good option if you have cash savings in excess of an appropriate emergency fund.

Bear in mind that fixed-term savings accounts typically charge a penalty for withdrawing money before the end of the term. Make sure you check the terms and conditions and, where possible, draw money from easy-access savings accounts that don’t come with exit penalties.

If you tap into your emergency savings pot to pay for your medical treatment, you should look for ways to start building it up again once you’ve recovered from your treatment. It’s generally considered wise to have at least six months’ worth of essential expenditure saved as an emergency fund if you’re still working, or up to two years’ worth if you’re retired.

Selling investments

Another option is to sell some of your investments and use the proceeds to help cover your private medical bill. Your investment manager will be able to advise on whether this is a good time to sell your investments and which holdings in your portfolio are most appropriate to sell.

If you sell investments that have risen in value, you might have to pay capital gains tax (CGT) at up to 20% on the profits. You can mitigate CGT by using your annual CGT exemption, which enables you to make tax-free gains of up to £6,000 in the 2023/24 tax year or up to £3,000 in the 2024/25 tax year. This can’t be carried forward into the next tax year, so if you think you’re going to have a large medical bill in the future, maximising your tax-free exemption each year could help to minimise your CGT liability further down the line.

Gains on investments held inside an ISA wrapper are exempt from CGT. Under flexible ISA rules, it’s possible to withdraw money and then pay the same amount back in again without it affecting your ISA allowance, as long as this occurs in the same tax year. Your financial adviser will be able to explain whether this option is available to you.

Using your pension tax-free lump sum

If you’re coming up to retirement, another option is to use your pension tax-free lump sum to pay for private healthcare. From the age of 55 (57 from April 2028), you can usually take up to 25% of the amount you’ve built up in pensions as a lump sum and this won’t be subject to tax.

It’s really important to understand the impact that a large withdrawal could have on your pension. Taking too much money at the start of retirement could mean you have to make cutbacks in the future to avoid running out of money. If you don’t need all of your tax-free lump sum right now, you might be able to draw smaller amounts in stages, giving the rest the opportunity to benefit from further investment growth. 

Next steps

Ultimately, the best way to pay for private healthcare will depend on your individual circumstances, including your financial position, whether you’re still working or retired, your goals, and your attitude to investment risk. Getting some financial advice will help you feel confident you’ve made the right decision with your money, so you can focus on your health and the things that matter most to you.


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The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

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