Probably the least understood of the common Tax Reliefs is the Medical Insurance Tax Relief – so many people miss out on this tax relief!

How does it work?

If you pay for Medical Insurance to an Insurer direct or through your employer, you will receive this relief at source. i.e. your premium is reduced, so you pay a lesser amount.
However, if your employer pays for your medical insurance, they pay the full premium. but you can then separately claim the tax relief on this. The tax relief is given at 20%.

If you have not received this tax credit in the past, you can claim for the last 4 years.

Below are a few examples of Medical insurance tax credit in operation.  Be warned:  it is one of the more complicated reliefs!

Example 1
Your employer pays for the medical insurance for you and your family. This amounts to €2,000. No tax relief is given at source, but you are allowed an additional Tax Credit of €400 (being €2,000*20%).

In other cases, the employer splits it 50:50 with you.
Example 2
An employer discharges the full amount of the premium and recovers 50% of the premium (net of TRS) from the employee.
Assume the Gross Premium is €1,000
TRS (Tax Relief at Source) €200
Net Premium € 800
Recovered from employee €400

The employer pays over €800 to the authorised insurer (€400 of which is recovered from the employee) and pays €100 TRS (amount attributable to the €400 paid by the employer) to Revenue.

The taxable benefit (notional pay) is:
Cost to employer €900 (€800 premium paid + €100 TRS paid)
Less amount made good by employee €400
Notional Pay €500

The employee is entitled to a tax credit of €500 @ 20% in his or her certificate of tax credits. He or she has already received credit by way of TRS of €100 by paying the net (of TRS) premium of €400 direct to the employer.

More information

Find out more about Tax reliefs and Medical Insurance tax credit in our Top Tax Tips