Tax deadline looming?

October 24, 2011

Everyone’s focus when it comes to tax time of year is on both reducing your tax liability and ensuring you have enough money set aside to settle whatever those liabilities are.  We can help with the first bit.  Your accountant is undoubtedly the best person to guide you through the form filling, to make sure you are compliant with your returns and ensuring you are availing of any tax breaks applicable to your needs, however sometimes, there are things that we all pay for, that qualify for tax relief but those that qualify for them, don’t avail of.  Two of these things are insurance policies that all self-employed people should have.

1.  Income protection.  It’s a great type of policy with a very simple aim – to make sure you have a regular income when you can’t earn one through your usual work due to an illness or injury.  The fact that your premiums qualify for tax relief at the marginal rate of 41% is a bonus.

2.  Pension term assurance.  This used to be known as self-employed term assurance or SETA for short.  Put simply, it is a life assurance policy that is designed to pay out a lump sum to your family if you die during your working years, thus replacing the income you would have earned through your work had things proceeded normally.  Again, a simple policy and the premiums qualify for tax relief at the marginal rate of 41%.

The first problem is that an alarming number of people don’t have these policies, opting instead for no cover at all or for a life assurance policy where tax relief isn’t available, making it at least 41% more expensive.  The second issue is that all too often, the people that have this sensible cover, don’t tell their accountant or the Revenue that they are making these payments.  If they don’t know, the relief cannot be claimed back.