Healthcare Benefit in Kind

I recently got a promotion at work and as a result my employer now pays my health insurance for my family and I (2 adults, 2 kids under 3). The cost of the policy is €2,800, but on my monthly payslip the taxable figure for healthcare underneath my salary is 334.36. I am paying the policy over 11 months, but this still comes in at €3677. I have questioned this at work, but have been told there are taxes to pay in addition to the cost of the policy. I was previously unaware of this, can anyone shed any light on this? Am I losing out here? Many thanks

Congratulations! It's unlikely you are losing out, unless you think medical insurance is a waste of money - as there is a financial cost to you where the employer pays your medical insurance premiums.

You are liable for benefit in kind tax (USC, PAYE, PRSI) on the premium amount. This works out as far less than you would have to pay if you bought the same policies personally on the open market. Based on your info above, it looks like you are getting €2800 worth of premiums for €877?

You are entitled to a refund of 20% as a tax credit for the value of the policy. You have to claim this yourself from the revenue usually, either by completing an IT5 form or phoning them directly. To claim the refund, you need to know the gross annual premium of your policy \ policies.
Most of the time the premium is shown as the net amount, so be careful.

Here is where it gets messy. The tax credit is capped as a max of 20% of €1000 (so for me, my tax credit was €200 even though my premium was €1400). I don't know the ins and outs of claiming on a family policy e.g. whether you are entitled to 20% back on each of the 4 premiums (at a guess, adult at €1000e each, and kids at €400 each, for example), or just a single 20% back on 1 premium.

Ah, more information here...
http://www.citizensinformation.ie/e...nd_reliefs/taxation_and_medical_expenses.html

"Following Budget 2014 tax relief on private health insurance premiums is limited to €1,000 for each adult and €500 for each child. This change applies to policies which are renewed or entered into on or after 16 October 2013. A child for the purposes of this provision includes a student over 18 years and under 23 years who is in full-time education. Relief continues to be granted at 20%."

So in the example above, your tax credit would be:
2 adults = 1000@20% = 400e
2 kids = 400@20% = 160e.
Total tax credit = 560e.

That's on an annual basis, you'll need to claim it for 11 months.

thanks for the reply - I'm with you on the BIK on the policy. At the higher rate that would be about 51% (incl. paye, usc and prsi) of the policy, so 2800 * .51 = €1428 over the yr or €130 a month cost to me.
My worry is that the figure appearing on my monthly payslip to be taxed should be 2800/11 = €254. Whereas its actually €334.36.
Interesting point about the gross/net policy. It may be that the €2800 I'm quoting for my policy is net, rather than gross. That would probably explain the higher amount appearing on my payslip to be taxed?

Hope that's clear, thanks again for the reply

I think the figure on your payslip should be the gross amount... if it was the net amount, that would imply the 20% tax relief had already been applied and I didn't think that was supposed to happen for employer paid premiums.

I'll check up on the gross/net cost of the premium then, if that's the case my payslip is correct and I'll claim the tax relief. Thanks for your help, much appreciated

Yes, should be the grossed up amount. Before the changes that would have been be easy too see as €2800/.8 = €3500 but now it is not so easy to work out from the payslip as not all the premium gets the 20% relief. You would need to work it out for each of the people on the policy. I think VHI split it out on the statement for employers but Laya don't, so in that case you need to assume the payroll dept know what they are doing which is very often not the case in these matters.
However above looks reasonable to me. Get your tax credits adjusted for the credit as mentioned above.

Hi, I'm going to add an extra level to this query. My employer also pays my premium, but the treatment on my payslip seems different to the above. There is an addition on the Earnings side of the payslip, that is on top of my salary. This, when summed over the year is the gross premium. There is then a deduction on the other side of an amount that totals over the year to 80% of the gross (in years prior to 2014). My question is: Am I still entitled to claim relief on the gross amount or is it somehow being accounted for already by this mechanism. Thanks for your help

Aodalaigh - your payslip sounds a bit baffling tbh... best thing is to check your Tax Credits certificate for 2014, 2013 etc and see if you were granted any medical insurance relief credits. If you weren't, get onto revenue and claim against the gross premium amount for that year.

What should appear then on the payslip as BIK amount : (using jersey99 example) 2800/11 or 3677 (2800+tax)/11. Or is there any formula to figure out what employers do to come with the BIK amount in your payslip?.