Benefit in Kind on Health Insurance Ireland: Employer Guide 2025

Providing health insurance as an employer in Ireland is a great way to attract and retain talent.

However, it's essential to understand the associated responsibilities, as this is considered a taxable Benefit-in-Kind (BIK) for employees.

So, how does BIK on health insurance work?

What are its tax implications for you and your employees?

We’ll answer these questions (and more) in this article.

Further Reading

• Read our guide on how to Apply for Ireland’s Illness Benefit if your employees are new to the application or claims process.
• Discover how, when, and where expectant mothers in your team can Apply for the Irish Maternity Benefit to enjoy a hassle-free maternity leave.
• Discover how Ireland’s Auto-Enrolment Pension Scheme can boost your employees’ retirement savings.

What Is Benefit-in-Kind on Health Insurance in Ireland?

A BIK is a non-cash benefit with monetary value that your employees receive in addition to their salary.

In Ireland, when you provide health insurance to your employees, the government considers it a benefit-in-kind.

What does health insurance offered as BIK typically cover?

BIK health insurance covers a range of medical services, similar to any standard health insurance scheme. This can include general practitioner visits, hospital stays, surgical procedures, and sometimes even dental and optical care.

The extent of coverage depends on the specific policy you have chosen.

That said, health insurance as a BIK has unique financial and tax implications for you and your employees.

It primarily adds to your employee's taxable income (we’ll explain this with an example later when we discuss the tax implications for employees who get health insurance as BIK).

How is BIK different from a direct salary increase?

While a direct salary increase and a benefit-in-kind like health insurance raise your employee’s taxable income, the former boosts their cash earnings. In contrast, the latter adds value without increasing their cash pay.

Health insurance as a benefit-in-kind requires you and your employees to be mindful of its tax treatment. Let's explore how this impacts each party.

Employer's Responsibilities When Offering BIK Health Insurance in Ireland

Here’s a quick guide on how you can provide health insurance to your employees while meeting all legal obligations.

1. Determine the BIK Value of Health Insurance

As an Irish employer, you must accurately determine the taxable Benefit-in-Kind (BIK) amount for health insurance premiums paid on your employees' behalf.

Why is this important?

Under Ireland's PAYE (Pay As You Earn) system, you're responsible for calculating and deducting the correct amount of income tax from your employees' salaries.

Regarding health insurance, the premium you pay is considered a taxable BIK. This means you need to add the entire gross premium of the policy to your employee's taxable income.

But there's more to it.

In addition to PAYE, your employees are also liable for Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) based on their gross pay, which includes the BIK premium payments.

So, to deduct tax, PRSI, and USC accurately, you must calculate the BIK amount precisely. It ensures compliance with Irish tax regulations and helps maintain transparent and fair payroll practices.

How Do You Determine the BIK Value of Health Insurance?

You must consider the policy's gross premium, which is the total cost, before any medical insurance tax relief.

For example:

Suppose the annual gross premium of a health insurance policy is €2,000. This is the amount you must use for BIK valuation.

Then, add the premium amount (and any other BIKs you offer) to employee pay. The gross pay is used for tax, PRSI, and USC calculations.

2. Reporting BIK on Health Insurance

After determining the BIK value of health insurance, you must report it accurately.

Companies typically integrate this step into their payroll system.

Why is BIK reporting important?

Timely and precise reporting of BIK is not just a matter of financial accuracy; it's a legal requirement.

It ensures that both you and your employees are up-to-date with their tax obligations.

The Irish Revenue Commissioners are stringent about compliance with tax regulations. Any discrepancies or delays in reporting can lead to complications, potentially resulting in penalties or audits.

3. Paying the Net Premium and Tax Relief at Source (TRS)

This is the step where you pay the premium to the insurer.

You might think you need to pay the whole premium to the insurer, but here's the twist — you actually pay a reduced amount.

Why’s that?

The payments for health insurance from authorised Irish insurance companies qualify for tax relief. The insurer would have already worked in the tax relief at source (TRS), which is set at 20% of the total premium in the tax year 2025-26.

In essence, you only pay the net or tax-relieved premium to the insurer.

The employee can then claim the medical insurance relief when filing their returns (we’ll cover this later - under tax implications for employees). So you must return the TRS amount to Revenue.

Too complicated?

Let’s break it down:

You pay the insurer the discounted premium and send the TRS amount to Revenue. Your employees will then claim that TRS amount later on.

For example:

If the gross premium for an employee's health insurance is €1,000, the TRS would be €200 (20% of €1,000).

You'd pay €800 to the insurance company and then remit the €200 TRS to Revenue. Your employee can claim this €200 back when tax time rolls around.

It's a win-win — you comply with tax laws, and your Irish employees get their due relief.

Paying the Tax Relief to Revenue

Here’s what you need to know about returning the value of Medical Insurance Relief to Revenue:

• Where to Pay: The amount of Medical Insurance Relief should be paid to the TRS section of the Collector-General's Division.

• How to Pay:
  • If you're registered for Corporation Tax (CT), include it in your preliminary tax payment under your CT1 form.
  • For those registered for Income Tax (IT), it is included in the preliminary tax payment, detailed in Form 11.
  • If you're not registered for either Income Tax or CT or are a non-resident, you can pay via cheque or bank draft.

• Tax Deduction: You're eligible to claim a deduction for the gross value of the policy for Case I or Case II purposes.

In Ireland, Case I and Case II refer to tax deduction categories for businesses. Case I applies to trading income (like sales revenue), while Case II covers non-trading income (like investment income).

4. Record Keeping and Compliance

You must maintain detailed records related to your employee's health insurance.

This practice not only aids in transparency but also ensures you’re ready for any audits or inquiries from the tax authorities.

Here's what you should keep track of:

• Premium Payments: Record the exact amounts paid as net premiums to the insurance company and the TRS amounts remitted to Revenue.

• BIK Amounts: Keep a clear record of how you've calculated the BIK value for each of your employees’ health insurance policies. Remember, this should reflect the gross value of the insurance premium.

• Employee Details: Maintain records of which of your employees are covered under the policy and any changes that occur during the year.

• Policy Information: Document details of the health insurance policies, including coverage terms and any changes or updates.

Cost Considerations for Employers

As an employer, when offering health insurance as a BIK, you should keep some key cost considerations in mind. They are:

• No Tax Relief at Source (TRS)
  • Unlike your employees, you do not receive TRS on the medical insurance premiums you pay for your staff.
  • Remember, you pay the net premium after TRS but must submit the relief to Revenue.

• Deductible Business Expense
  • You can treat your premiums as BIK and use them as a deductible business expense.
  • This can reduce your taxable income, potentially lowering overall tax liability.

• Your PRSI Liability
  • You're still liable to pay PRSI on the BIK value despite the deductibility.
  • This is an additional cost to factor into your budgeting for employee benefits.

Offering health insurance as BIK adds to your administrative and cost overheads, piling up a ton of paperwork.

All this can send your payroll system into a frenzy.

But don't worry. Kota is here to help!

What’s Kota?

Kota is a cutting-edge digital platform that helps employers streamline health insurance management and optimise costs.

The app gives you access to compliant health insurance plans from Irish Life Health. This means you can provide health insurance for your people all in one place, without all the administrative overhead.

Here are some reasons why you’ll love Kota:

• Centralised Information: Kota provides a unified platform where all necessary information for accountants, payroll, or finance teams is readily available. This makes managing health insurance offerings more streamlined.
• Payroll Reporting Snapshot: Under the billing tab, you can access a payroll reporting snapshot. This feature identifies charges for all employees in any particular month, simplifying the process of tracking and reporting health insurance costs.

• Downloadable Reports: You can easily download detailed reports in CSV format, which includes all the essential information for your payroll processing. This feature is convenient for managing your BIK calculations and reporting efficiently.
• Employee Identification: The platform makes it easy to identify staff with details like employee name and ID, ensuring that health insurance contributions are accurately matched to each of your employees.

What Are the Tax Implications for Employees Who Get Health Insurance as BIK?

Remember, if you offer private health insurance to your employees, they’re liable to pay tax on the entire gross premium.

This means the full cost of the policy, before any tax relief, gets added to your employee’s taxable income.

For example:

Suppose you pay a €1,200 annual premium for your employee’s health insurance. This premium counts as a benefit-in-kind (BIK) and adds to their taxable income.

For tax purposes, it's like your employees are earning an extra €1,200.

You would have already accounted for this BIK amount in their gross income (used to deduct their taxes).

The good news?

Your employees can claim the medical insurance relief from Revenue as annual tax credits (aka Employee Tax Credit) at 20% of the gross premium.

To claim their tax credits, you employees must:

• Sign in to Revenue's myAccount to make a claim at https://www.ros.ie/myaccount-web.
• Click on 'Manage your tax' in PAYE Services.
• Select 'Claim tax credits' and choose 'Medical Insurance Relief' under 'Health'.

The Irish government taxes employees as a percentage of their gross income (salary + all taxable benefits like employer-funded health insurance), applying a 20% rate up to a standard rate cut-off point and a 40% higher rate above that threshold. The Irish government has raised the standard income tax rate cut-off point to €44,000 in the 2025 budget, up from €42,000 in 2024.

What Are Employee Responsibilities When Receiving BIK

• Reporting: While you typically report BIK values in your employees' PAYE earnings to Revenue, employees should double-check their payslips and annual Employment Detail Summary (formerly P60) for accuracy.

• Compliance with Deadlines: Your employees should stay vigilant about their tax filing deadlines to successfully claim their tax credits and avoid late submission penalties.

• Record Keeping: Your employees must keep documents related to their health insurance policy and medical expenses safe. These documents are handy when claiming TRS or if Revenue has any questions.

3 FAQs About BIK on Health Insurance in Ireland

Here are three frequently asked questions to enhance your understanding of BIK on health insurance:

1. What Are the Limits on Tax Relief Claims for BIK Health Insurance?

For BIK health insurance in Ireland, the tax relief (Medical Insurance Relief) available to your employees is set at 20% of the gross premium.

However, there are caps on the maximum relief your employees can claim based on whether the policy is for an adult or a child.

• For adult policies:
  • The relief is capped at the lower of two amounts: either 20% of the policy's cost or 20% of a €1,000 limit, resulting in a maximum tax credit of €200.

• For child policies (the beneficiary must be below 21):
  • The relief available is similarly capped, being the lesser of 20% of the policy cost or 20% of a €500 limit, leading to a maximum credit of €100.

2. What Happens When Your Employee Pays a Part of the Premium Directly?

Suppose one of your employees pays a portion of their health insurance premium directly; they will receive TRS in the form of a discounted premium for their part of the contribution.

However, the tax relief your employee can claim on the portion you pay as their employer is pro-rated. This means they can only claim relief at 20% of your contribution, not the entire premium amount.

For example, if you pay 50% of the premium, your employee can only claim tax relief on that 50%.

3. What Other Employee Benefits Are Counted as BIK?

In Ireland, BIKs extend beyond health insurance to include:

• Company car
• Travel passes
• Sports memberships
• Use of company assets, etc.

You must report these taxable benefits as part of your employee's income, similar to health insurance premiums.

Simplify Your BIK Employee Health Insurance Offering With Kota

Offering private healthcare insurance demonstrates your commitment to employee well-being and can significantly lift team morale.

However, as a taxable benefit-in-kind in Ireland, it also brings significant administrative and cost overheads for employers.

Thankfully, you can simplify the process through Kota.

Join Kota to streamline employee health insurance today.