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Income protection – tax relief

Income protection – tax relief

Permanent Health Benefit contributions

You might take part in a scheme to have your income continue if you are absent due to illness or injury. The schemes, also known as income protection plans, can be:

  1. group schemes or individual policies, and will have a Revenue registered number
  2. approved or unapproved by Revenue as Permanent Health Benefit Schemes.

If you take part in such a scheme you may claim tax relief under certain conditions.

To qualify for tax relief, the scheme you take part in must be Revenue approved.

Relief due

You will receive tax relief based on the premiums that you paid in the year that you are claiming for. The relief is allowed by either:

  1. your employer, who will deduct the payments from your gross pay before calculating Pay As You Earn (PAYE). This is known as net pay arrangement
  2. Revenue, who will adjust your standard rate cut-off point (SRCOP) and tax credits.

The relief you receive is limited to 10% of your total income for the tax year. Payments to these schemes do not qualify for Pay Related Social Insurance (PRSI) or Universal Social Charge (USC) relief.

Your employer may contribute to an approved scheme on your behalf. You must pay USC on these contributions.

PAYE and PRSI does not apply where the combined contribution (employee and employer) does not exceed 10% of the employee’s income. Any excess over 10% should be put through the payroll and PAYE and PRSI paid on that amount.

Where the premiums are for an unapproved policy or scheme, the premiums paid by the employer are taxable as Benefit in Kind (BIK).

How to claim

You can claim the relief by:

  1. using myAccount during the year
  2. completing a Form 12 at the end of the year.

Any queries on the above give me a call on 091 763817 or email me at oliver@taxreturnhelp.ie

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