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You took out an income protection policy to cover your back if you’re ever too sick or injured to work—and that was a solid move. But here’s something you might not know: you can claim tax relief on your premiums and save yourself a decent bit of money every year.
Many people in Ireland miss this entirely, and as a result, they end up paying more than they should for their income protection. The good news is, once you know how it works, it’s simple to sort. Here’s what you need to know to start saving and put some money back in your pocket.
What Is Income Protection?
Think of income protection as your financial safety net. If you get ill or injured and are unable to work for a while, this type of insurance steps in and gives you a replacement income, so you can still cover your bills and day-to-day expenses without draining your savings. It’s a handy way to protect your lifestyle if life throws you off course.
You can take out an income protection policy if you’re:
- Working full-time (more than 16 hours a week)
- Self-employed or earning an income from employment
- Over 18 (though the exact age can vary depending on the plan)
Curious if it’s a good fit for you? Check out our Income Protection Guide to learn more.
What Affects the Cost of My Income Protection?
The cost of your income protection premium depends on a few personal factors because the policy is tailored to fit you. Factors such as your salary, the amount of cover you choose (up to 75% of your income), and your job type all play a role.
Your deferral period (how long you wait before payments start), your retirement age, and whether or not you smoke will also affect the price. And of course, your age and health history matter too—generally, the younger and healthier you are, the cheaper it’ll be.
Income Protection Costs Less Than You Might Think (Thanks to Tax Relief)
When you’re figuring out how much income protection will cost, don’t forget—you can claim some of the cost back, which means you’ll actually be paying less than you think. It’s genuinely more affordable than most people realise, especially once you factor in the tax relief that’s available in Ireland.
Whether you’re paying €50 or €150 a month, a portion of that is recovered through tax relief at either 20% or 40%, depending on your income. So while the full premium might seem like a stretch at first glance, the real cost to your pocket is much lower. And knowing your income is protected if life takes an unexpected turn? That’s a pretty great feeling—and a smart move.
How Much Can You Save?
Let’s say you’re a PAYE employee earning €60,000 a year, and you take out an income protection policy that costs €100 per month (€1,200 a year). You’re taxed at the 40% rate.
Because income protection premiums qualify for tax relief at your marginal rate, here’s how it breaks down:
Annual premium paid: €1,200
Tax relief at 40%: €480
Real cost after tax relief: €720 per year (or just €60 a month)
Total saved per year: €480
That’s €480 back in your pocket just for claiming tax relief—nearly half the cost of your policy. Not bad at all
If you’re taxed at the 20% rate, the savings are still solid. The same policy would effectively cost you €80 per month instead of €100. Even at the lower tax rate, that’s €240 back in your pocket each year—a meaningful saving that makes your cover more affordable.
Be financially prepared. Get a personalised quote today!
Claiming Your Premium Tax Relief
Claiming tax relief on your income protection premiums is easier than you might think. If you haven’t already, start by registering for Revenue’s MyAccount. Once you’re logged in, go to PAYE Services and click on “Manage Your Tax.”
From there, select “Claim Tax Credits,” and you’ll see a section labelled “Health”—under that, you’ll find “Income Continuance.” This is where you enter your policy details to claim your tax relief. Just make sure to have your Tax Relief Certificate from your insurer ready when you’re filling it in.
Depending on how you’re set up for tax, here’s how you can claim the relief:
Company Owner – Executive Income Protection
If you’re a company owner, your company can pay the premiums directly from the business account. You don’t need to claim personal tax relief because:
- The business gets the tax relief as a deductible expense.
- There’s no Benefit-in-Kind (BIK) charge for you.
Self-Employed – Personal Income Protection
If you’re self-employed, you can claim tax relief when you submit your annual tax return. Make sure to:
- Keep your Tax Relief Certificate
- File via Revenue Online Service (ROS)
PAYE Employee – Personal Income Protection
If you’re a PAYE employee, you can claim tax relief on your income protection premiums by entering your policy details through your myAccount on Revenue.ie. It’s a simple process, and you’ll be guided through each step.
Your insurance provider should give you a Tax Relief Certificate when you first take out the policy, and then annually thereafter. Make sure to keep these certificates safe—Revenue may ask for them if they need to verify your claim.
Important: You’ll need to send Revenue a new certificate every year to prove you’re still paying your premiums and continue receiving the relief.
What If You Forgot to Claim?
If you’ve forgotten to claim tax relief on your income protection premiums, there’s good news: you can still claim for the past four years. According to Revenue’s Four-Year Rule, you have up to four years from the end of the tax year to submit a claim for a refund.
For example, to claim relief for the 2021 tax year, you must submit your claim by 31 December 2025. After this period, refunds for that year can no longer be processed.
Tax on the Way In vs. Tax on the Way Out
When You’re Paying Your Premiums
The good part is that you get tax relief on your premiums. Whether you’re employed or self-employed, you can claim back tax at your marginal rate (that’s 20% or 40%, depending on your income).
So you’re rewarded with a nice tax break while you’re healthy and paying into the policy.
When You’re Receiving the Benefit
Now here’s the part many people ask about—what happens if you actually need to claim on your policy?
If you ever need to rely on your income protection because you’re too ill or injured to work, the monthly payments you receive are treated as income. That means:
- They’re taxable under PAYE
- You’ll pay Income Tax, USC, and PRSI on them
- Just like you would on a normal salary
The reason is that you received tax relief on the way in; Revenue wants its slice if you ever receive a payout. It’s kind of like a trade-off—you save tax now, but you’ll pay tax later if you claim.
But still, when you’re out of work, having 75% of your income (even taxed) is a lifesaver compared to no income at all.
What to Do with Your Tax Refund
Once you receive your tax refund, it’s the perfect time to make that extra money work for you. Not sure where to start? Check out our blog, “9 Smart Ways to Use Your Tax Refund,” where we share practical ideas to help you make the most of your return—whether it’s saving for your kid’s education, reducing debt, or investing in your financial well-being. A little planning can turn your refund into something worthwhile.
Your income deserves protection. Let’s get started!
Get Your Income Protection Quote
Income protection is your backup plan for when life doesn’t go to plan—and with tax relief available, it’s probably more affordable than you thought. If you’ve been putting off getting cover because you assumed it was out of your budget, now you have the facts to make a confident, informed decision.
Knowing you could claim back 20–40% of your premiums means you can finally look at income protection in a whole new light. Ready to see what it could cost you? Getting a quote is quick, easy, and completely obligation-free.
We provide various financial services, such as mortgages, serious illness cover, financial planning, pensions, life insurance, health insurance, and savings & investments.
All our content has been written or overseen by a qualified financial advisor. However, you should always seek individual financial advice for your unique circumstances.
