Budget 2014 cuts to tax relief on health insurance payments are expected to bring in an extra €127 Million a year in income taxes – but it might just result in people opting for cheaper health insurance policies. The change takes effect straight away – and not from January 2014- so people can expect to see higher insurance bills at their next renewal . The premiums are charged with the tax relief taken off at source by the insurance companies.
In Budget 2014 it was announced that from 16th October the tax relief for medical insurance premiums will be restricted to the first €1,000 per adult insured and the first €500 per child insured. There was no upper limit prior to this change.
In the example of a person who has health insurance priced at €6000 a year to cover themselves and their partner and their two children (€2400 each adult and €600 each child) .
Before Budget 2014 they would have paid a net annual amount of €4,800 after adjustments for the tax relief at source. After the changes announced in the Budget – they will now pay a net amount of €5,400 because they will only get tax relief on the first €3000 (ie €600) .
The insurance companies say it will affect large numbers of customers (90%) but Revenue say it will affect about 50% of policies.
A family on the VHI’s “One Family plan” currently paying €1,206 per adult with the charge for children set at €327. After the Budget changes the net cost of cover for an adult on this policy will rise €41 from €965 to €1,006 a year. Thechild price will be unchanged.