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Do I Pay Tax On Income Protection Payments?
It won’t be news to any working adult in the UK that we are essentially taxed every time we breathe, eat and sleep - and not even insurance products are spared being taxed. This includes income protection, however it’s not as black and white as that. With income protection, the tax depends on who is paying the premiums for your policy - you, your employer or a bit of both.
Who’s footing the bill?
In the eyes of the taxman, you’ve paid for the premiums yourself from your net income at the source, so the policy has effectively already been taxed and the taxman has had his bit one way or another. This is why most insurers generally only allow you to insure 65% of your gross income, as it works out as approximately the same as your net income.
What if my income protection is paid for by my employer?
What if I’m not sure?
It’s possible that you could be paying towards an income protection policy out of your salary without even knowing. It’s definitely worth finding this out if you’re considering taking out an income protection policy of your own so that you don’t end up duplicating cover and ultimately wasting your precious pennies.
If you have anymore questions about income protection, we can help. Give us a call on 0800 316 7253 and chat with one of our expert advisers.
A ‘Searcher since 2015, John is a Protection expert having worked in our customer facing teams and best practice teams, and now is immersed in Protection Content and Marketing.See all articles by John Rogers
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