Income Protection Tax Relief Ireland 2026: How to Claim Back Up to 40% of Your Premiums

Income Protection Tax Relief Ireland 2026: How to Claim Back Up to 40% of Your Premiums

When most people hear the cost of income protection insurance, they wince. €100 a month? €150? That adds up fast when you're already juggling mortgage payments, bills, and everyday expenses.

But here's what many people in Ireland don't know: you can claim back a significant chunk through tax relief. We're talking 20% to 40% of your premiums - and for company directors, even more.

That €100 monthly premium? After tax relief, you might only be paying €60. Let's break down exactly how it works and how to claim it.

What Is Income Protection Tax Relief?

Income protection tax relief is a government incentive to encourage workers to protect their income. When you pay premiums for a Revenue-approved policy, you can claim back tax at your marginal rate - essentially, the government subsidizes your financial protection.

The relief applies whether you're PAYE, self-employed, in a partnership, or a company director. But the rate and claiming process varies by situation.

How Much Tax Relief Can You Get?

The amount of tax relief depends on your tax bracket and business structure.

For PAYE Employees and Sole Traders

You can claim tax relief at your marginal rate of tax:

• 20% tax bracket: Get 20% of your premiums back
• 40% tax bracket: Get 40% of your premiums back

Important limit: Tax relief is capped at 10% of your total income for the tax year.

For Company Directors: The Better Deal

If you're a company director and the company pays your income protection premium directly, you get an even better deal - an effective relief rate of up to 52%.

Here's how it breaks down:

• Income tax relief (20% or 40%)
• USC relief (up to 8%)
• PRSI relief (4%)
• Corporation Tax allowance (12.5% - the premium is a business expense)

This makes income protection one of the most tax-efficient benefits a company can provide for directors.

Real Cost Examples: What You Actually Pay

PAYE Employee on €50,000 (Sarah, 35, pays 40% tax)

• Annual premium: €960
• Tax relief at 40%: €384 back
• Actual cost: €576/year (€48/month)

Self-Employed on €70,000 (John, 42, pays 40% tax)

• Annual premium: €1,440
• Tax relief at 40%: €576 back
• Actual cost: €864/year (€72/month)

Company Director on €80,000 (Mary, 38)

• Annual premium: €1,680 (paid by company)
• Effective relief at 52%: €874 back
• Actual cost: €806/year (€67/month)
• Plus Corporation Tax relief reduces it further

That's less than two takeaway meals per month for complete income protection.

How to Claim Tax Relief: Step-by-Step

For PAYE Employees

Through Revenue MyAccount (Easiest):

1. Log into www.revenue.ie MyAccount
2. Go to "Manage Your Tax" → "Tax Credits & Reliefs"
3. Click "Health and Insurance"
4. Select "Permanent Health Insurance" (income protection's official name)
5. Enter total premiums paid
6. Submit - relief appears in your payslip within 1-2 pay cycles

Alternatively, claim at year-end through your annual tax return for a lump sum refund.

For Self-Employed

1. Keep records of all premium payments
2. Include premiums under "Health Insurance Relief" on your Form 11
3. Upload supporting documents if requested
4. Relief automatically reduces your tax bill at your marginal rate (20% or 40%)

For Company Directors

When the company pays premiums directly:

• Company claims as business expense on corporation tax return
• No Benefit-in-Kind tax for you
• Relief from income tax, USC, and PRSI happens automatically
• No personal claim needed - it's built into the structure

This is why executive income protection is so attractive for directors.

Can You Claim for Previous Years?

Yes! You can go back up to four years if you've been paying premiums but forgot to claim.

How to claim:

1. Log into Revenue MyAccount
2. Select "Review Your Tax"
3. Choose the year (up to 4 years back)
4. Add premiums under health insurance reliefs
5. Upload documentation (premium statements)
6. Submit for review

Revenue will issue a refund for overpaid tax - potentially hundreds or thousands of euros if you've been missing out.

Common Mistakes to Avoid

Not claiming at all - Many people don't know tax relief exists, paying 40% more than necessary.

Thinking it's automatic - For PAYE paying their own premiums, you must claim it manually.

Exceeding the 10% cap - Relief is limited to premiums up to 10% of your total income (e.g., €50,000 income = €5,000 max qualifying premiums).

Wrong insurance type - Only Revenue-approved income protection policies qualify. Check your policy documents for "Revenue-approved" or Section 470/471 TCA 1997.

Missing documentation - Keep all premium receipts and annual statements for Revenue requests.

What About When You Claim Benefits?

While you get tax relief on premiums, benefits paid out are taxable - treated as income subject to income tax, USC, and PRSI. Your insurer deducts these before paying you.

This is fair: you got relief going in, so Revenue takes their share coming out. But you've still protected your income and saved money along the way.

The 10% Income Cap Explained

Tax relief is limited to 10% of your total income for the tax year.

Example: €60,000 income = €6,000 max qualifying premiums. If you pay more than €500/month, you can only claim relief on €6,000 annually.

For most people, this isn't an issue - typical premiums are well below this threshold.

Maximizing Your Tax Benefits

Claim every year - Set a January reminder to update tax credits or include in your return.

Company directors: Use executive income protection - Have the company pay directly for 52% effective relief vs 40% personal.

Claim previous years - Go back up to 4 years for potentially significant refunds.

Keep documentation - Save all statements and receipts for easier, faster claims.

Review coverage regularly - As income increases, higher premiums mean more tax relief while keeping you properly protected.

The Bottom Line: Don't Leave Money on the Table

Income protection tax relief reduces the real cost by 20-40% (52% for company directors), making it genuinely affordable.

Yet thousands of Irish people either:

• Skip income protection thinking it's too expensive (without knowing about tax relief)
• Have it but never claim the relief they're entitled to

Don't be one of them. If you have income protection, claim today. If you don't, factor in tax relief when calculating cost - it's more affordable than you think.

Next Steps

If you have income protection: Log into Revenue MyAccount today and claim your relief. Check for previous years too.

If you don't have income protection: Get quotes, calculate your real cost after tax relief, and protect your income before you need to.

Your income is your most valuable asset. Protect it, and let the government help pay for it.

Need a quote? Contact QuoteLeader.ie for personalized quotes from Ireland's leading insurers. We'll show you the true cost after tax relief and help you get the right coverage. Get your personalised Income Protection Quote here.