Have you claimed tax relief on your health insurance premiums paid by your employer?

When you take out a health insurance policy with the likes of the VHI, Glo etc. the tax relief that is granted to the individual is done at source which means that the amount paid to an insurance provider has already taken tax relief into account.

The tax relief available is granted at 20% with the qualifying amount set at a maximum of €1,000 or your annual premium, whichever is the lower.

See example below;

Gross Premium
€1,500

Tax relief (€1,000 x 20%)
€200

Net Premium
€1,300

In this scenario there is no need to contact Revenue as your medical insurance provider will implement the necessary changes to the amount of tax relief due.

However, there are certain situations where tax relief at source (TRS) does not apply, and that is when an employer pays the health insurance premiums on behalf of an employee and his or her dependents. In these circumstances a benefit in kind liability arises – PAYE, PRSI and USC are deducted from the earnings of the employee on the value of the benefit that is being provided and paid for.

Because the employee has not benefited from the TRS arising on the premium paid by their employer, they are still entitled to the tax relief but in these circumstances it is necessary for the employee to calculate the amount they are entitled to and make a claim directly themselves to their local Revenue office.

Example 1 – Single Individual – Employer pays 100% of the premium

Gross Premium paid by employer
€2,000

Tax relief granted to employer - €1,000 x 20%
€200

Net payment made by employer
€1,800

Employer payment to Collector General
€200

The employer in this instance will calculate the PAYE, PRSI and USC due from the employee on the full €2,000 paid and in turn pays the €200 they receive back in tax relief to the Collector General.

As the employee has not benefited from any tax relief and is charged BIK on the €2,000 payment, he or she is entitled to a tax credit of €200 in his/her tax credit certificate.

Example 2 – Two adults at €1,200 each and two children at €300 each – employer pays 100% of premiums.

Gross Premium paid by employer
€3,000

Tax relief granted to employer - €2,600 x 20%
€520

Net payment made by employer
€2,480

Employer payment to Collector General
€520

In this instance the employer is charged BIK on €3,000 and is entitled to a tax credit of €520 in their tax credit certificate.

Example 3 - Two adults at €1,200 each and two children at €300 each – employer pays 75% of premiums.

Gross Premium is
€3,000

Portion of premium paid by employer (75%)
€2,250

Tax relief granted to employer - €2,600 x 75% x 20%
€390

Net payment made by employer
€1,860

Employer payment to Collector General
€390

Portion of premium paid by employee
€750

Tax relief granted to employee - €2,600 x 25% x 20%
€130

In this instance, the employee has received tax relief at source of €130 in respect of the premiums paid by them but they have not benefited from the TRS arising on the portion of the premium paid by their employer and is therefore entitled to a tax credit of €390 in their tax credit certificate.

Claiming Relief

You can make a claim by either:

1. Phoning your regional PAYE LOCALL service or

2. Complete and submit a claim for Medical Insurance and Age Related Tax Credit to your local Revenue office – a link to the claim form is at the end of this article and can also be found in the My | Resource Library inside My|Money.

And don’t forget if you haven’t made a claim in recent years’ there is a 4 year time limit so any claim has to be made within 4 years after the end of the tax year to which the claim relates to.

For further information see below...