Income Protection Insurance Premiums Tax Deductible

The premiums must be incurred wholly and exclusively for the purpose of the business this is a common theme for any expense where your business is looking to claim tax relief.

Income protection insurance premiums tax deductible. Tax treatment of benefits received under permanent health benefit schemes section 125 taxes consolidation act 1997 this manual is currently unavailable as it is being updated. If you wish to put your income protection premiums through your limited company as a trading expense it is usually wise to take out executive income protection rather than a personal plan. Basically works like this. Income protection premiums up to certain limits qualify for tax relief at your marginal rate.

If you prepay your income protection before 30 june you can claim your tax deduction in the current financial year e g. No if your income protection is held within and paid for by your super fund the premiums are not tax deductible. You pay 12 months of premium in advance to receive a tax deduction. Tax position on income protection an income protection insurance permanent health insurance scheme can be established so that the employer will receive a proportion of the salary of an employee if the employee is unable to work because of ill health.

If you re claiming a tax deduction for insurance premiums with a dual purpose then no tax relief will be obtained. With a personal plan tax is paid on the premiums which are paid from post tax earnings and as a result a claim will be paid. Please be advised that this is a general guide only and we are not registered tax agents under the tax agent services act 2009. If you are employed the life assurance company will deduct tax and social insurance payments from your benefits in the same way that your employer would.

The decision in mcknight v sheppard 1999 71 tc 419 see bim37965 does not affect this. This is because the premiums cover some risks where the related costs are not allowable for tax purposes. I agree with mr mischief if you claimed the money in theory will pay someone to run the business so if relief is claimed on the premiums the income is taxable but offset by the salary deduction so should be tax neutral and if the insurance makes additional profit it would be right for this to be taxed. Tax relief on income protection.

The employer then pays the amounts involved to the employee. Part 15 01 10 relief for contributions to permanent health benefit schemes. If you take a tax deduction for the insurance premium paid then the proceeds on a claim become tax assessable. Section 471 taxes consolidation act 1997.