Is my tax credit for an income continuance policy too low?

[Dr Strangelove]

I am a top-rate taxpayer, all income is PAYE from a single employer.

I have an income protection plan with Aviva with a premium of €1,000 a year.

I have logged this policy on PAYE Anytime and I see a tax credit of only €200. Shouldn't I get a credit of €400 as a top-rate taxpayer?

Revenue guidance doesn't mention standard-rating:

An individual is entitled to claim income tax relief on the premiums he or she pays in respect of a Revenue approved permanent health benefit policy, to the extent that the premiums do not exceed 10% of his or her total income in the relevant tax year.

Tax relief in respect of permanent health insurance premiums can be given directly by the policy holder’s employer through what is known as the net pay arrangement. Where tax relief on the premiums is not given by the employer by way of the ‘net pay arrangement’, such relief may be claimed directly from the Revenue Commissioners by submitting policy details to your local Revenue office, or a claim can be made via myEnquiries

 

[Protocol]

The benefit from tax relief at 40% are sometimes given in two ways:

(1) increase in tax credits

AND

(2) increase in SRCOP

Look at the Cert of Tax Credits to check whether this is the case.

 

[Dr Strangelove]

Thanks @Protocol - I checked and my certificate and you're right my Rate Band 1 has been increased from €42,000 to €43,000

So I get €200 by way of a tax credit and then am taxed on at 20% instead of 40% on €1,000 more of income for another €200.

So €400 in total which sounds right.

Stupid question: why do they do it this way?

 

[Ciru75]

Thanks @Protocol - I checked and my certificate and you're right my Rate Band 1 has been increased from €42,000 to €43,000

So I get €200 by way of a tax credit and then am taxed on at 20% instead of 40% on €1,000 more of income for another €200.

So €400 in total which sounds right.

Stupid question: why do they do it this way?

Doing it that way means that you get the relief at 40% if you're paying the higher rate and if you're only paying the standard rate, the change in rate band won't have any effect and you'll get the relief at 20% from the credit change.

 

[Dr Strangelove]

I understand now. That’s why it’s all credits and no adjustment to SRCOP for medical expenses because I only get relief at the 20% rate.

 

[cally1990]

I understand now. That’s why it’s all credits and no adjustment to SRCOP for medical expenses because I only get relief at the 20% rate.

Correct