# is it worth accepting medical Insurance as BIK



## Mizen (9 Nov 2011)

Is it possible to say what the cost of accepting medical Insurance to the value of 3k paid for by employer would be to an individual.  I understand it would be considered BIK but I havent a clue how that works at all

regards


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## mandelbrot (9 Nov 2011)

Well basically you'll be taxed on an extra 3k of income, so if you're a high rate taxpayer, that'll be 3k @ (41%+4% PRSI + 7% USC) = 1,560 extra in income tax.

You'll also be entitled to 20% tax relief on the 3k, so you'll get an additional tax credit of 600.

So, effectively you get 3k worth of medical insurance for €960 (€1,560 extra tax - 600 extra tax credit).


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## elcato (9 Nov 2011)

Assuming you are on the higher rate of tax you will be charged about 52% of 3k in extra taxes. You will get a tax credit of 20% back so the real cost is about 30% extra in tax to be paid by you over the year. i.e. you would pay an extra 1k tax but you would have medical insurance worth 3k. If you are only on the lower tax rate you will benifit slightly better. You will not get the tax credit back as you are paying about 28% i.e 20% tax +4% prsi + usc rate which is about 3% (?) but all in all you will save two thirds. Make sense ?


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## Mizen (9 Nov 2011)

thank you both for keeping it simple, it does make sense


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## Mrs Vimes (9 Nov 2011)

elcato said:


> You will not get the tax credit back




Not sure if this is accurate, is the tax credit not available to everyone? I'm pretty sure if you're paying for health insurance directly and aren't paying any tax at all you still only have to pay the amount net of tax relief.


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## Gekko (9 Nov 2011)

Say a person's health insurance premium is €1,000.

- Person pays it themselves...Cost to them = €800 (because they get 20% tax relief at source)

- Company pays it...BIK applied to €1,000...cost to the person = €320 (i.e. 41% income tax plus 4% PRSI plus 7% USC less the 20% health insurance credit the person should be entitled to - Assuming they're a higher rate tax payer).

The above example is also based on someone who's not entitled to the additional age related credit.


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## Mizen (10 Nov 2011)

Does the 1000euro health insurance paid by company then become part of  your gross income on you p60


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## mandelbrot (10 Nov 2011)

Mizen said:


> Does the 1000euro health insurance paid by company then become part of your gross income on you p60


 
Yes (because it is part of your gross income! )


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## M K Brazil (11 Nov 2011)

If you have the option of a salary of €3k extra or medical insurance of €3k - then its more or less the same difference.


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## Gekko (12 Nov 2011)

M K Brazil said:


> If you have the option of a salary of €3k extra or medical insurance of €3k - then its more or less the same difference.


 
No it's not (if you're taking out the medical insurance anyway).

To pay the medical insurance yourself, you require income of approximately €6,000 (i.e. €6,000 less circa 50% tax = €3,000).

If your employer pays it, the cost to you is approximately €900 (i.e. tax of €1,500 less a 20% tax credit of €600).


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## ClubMan (12 Nov 2011)

> *is it worth accepting medical Insurance as BIK*


Perhaps not - regardless of the savings involved - if you would not otherwise feel the need to take out insurance.


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## Donal112 (16 Nov 2011)

mandelbrot said:


> Well basically you'll be taxed on an extra 3k of income, so if you're a high rate taxpayer, that'll be 3k @ (41%+4% PRSI + 7% USC) = 1,560 extra in income tax.
> 
> You'll also be entitled to 20% tax relief on the 3k, so you'll get an additional tax credit of 600.
> 
> So, effectively you get 3k worth of medical insurance for €960 (€1,560 extra tax - 600 extra tax credit).


 
Hi, do you have to apply for this additional Tax Credit and get an updated Tax Credit statement - or should your employer just adjust the tax deducted figures to take the tax relief on the BIK into account?


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## ClubMan (16 Nov 2011)

If your employer pays private health insurance on your behalf as a _BIK _subject to the usual deductions through payroll then you must manually claim the tax credit in respect of the gross premiums.

Update: see here 

[broken link removed]


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## eoghanlk (26 Nov 2011)

I just found out about this recently so I got my employer to write a letter stating what health insurance BIK I have paid in the last 4 years. I sent this off to the tax office and got a nice Christmas present into my account. I was told that once I claimed this year, it will automatically be included in later years but I will obviously double check.


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## tosullivan (20 Dec 2011)

My employer has just started to take BIK from my monthly wages.  It shows up on my payslip as an extra line to the value of €345.15 for the past 2 months.

Any idea how they work out this monthly figure?  Is it just 1/12th of the annual cost of the health insurance that they pay on my behalf?  If so, its not working out as that would mean the health insurance cost to them would be €4141.80

I worked it out that the annual payment is €3328.44

Also, I've been getting health insurance paid for by the company for a few yrs but only now they are starting to take the payment.  Has there been a clamp down on BIK?


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## GoldDigga (20 Feb 2012)

I was just researching this issue and came across this thread.

I was looking at my BIK statement for my health insurance in work when i noticed that the amount in the statement ( 2k) did not match the amount the VHI had quoted in their renewal form (1600)

As already stated here, when the employer pays for your health insurance they pay the full gross premium. i.e 80% to the insurer and 20% to revenue. It is then up to the employee to reclaim the TRS as a tax credit.

I did not realize this up unitl now and have my employer has been paying my health insurance since for 7 years. My question is - Can i reclaim the TRS tax credit for any of the previous years other than 2012?


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## Gekko (21 Feb 2012)

Yes - You can go back four years so you can claim the credit for 2011, 2010, 2009 and 2008.


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## tosullivan (22 Feb 2012)

Can someone explain how I can claim the 20% TRS tax credits?
I checked online at my REACHSERVICES login and there is no area for claiming this particular credit.
Does it have to be done over the phone or in writing?


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## GoldDigga (22 Feb 2012)

> Yes - You can go back four years so you can claim the credit for 2011, 2010, 2009 and 2008.


 
Thanks. So if i claim this year for the last four years, how is that tax credit applied? Are they rolled up an applied to 2013?


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## WindUp (22 Feb 2012)

tosullivan said:


> Can someone explain how I can claim the 20% TRS tax credits?
> I checked online at my REACHSERVICES login and there is no area for claiming this particular credit.
> Does it have to be done over the phone or in writing?


 

Is there a risk here that you will have to pay the tax on the VHI paid for by your employers in previous years?


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## Gekko (22 Feb 2012)

GoldDigga said:


> Thanks. So if i claim this year for the last four years, how is that tax credit applied? Are they rolled up an applied to 2013?


 
Each credit is applied the year for which it arises.  For example, if your employer paid health insurance of €1,600 for you during 2009 (and treated €2,000 as the BIK), you'd receive a refund of €400 in respect of 2009.



WindUp said:


> Is there a risk here that you will have to pay the tax on the VHI paid for by your employers in previous years?


 
GoldDigga seems to be indicating that his/her employer has treated the gross premium as a benefit in kind so no tax underpayment issue should arise.


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## WindUp (23 Feb 2012)

Thanks Gekko - i was confusing tosullivan's and Golddigga's posts


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