How much BIK should I be paying?

I started a new job in January 2022.

My employer pays my health insurance fully subsidised which has an annual premium of 1,209.82. I have no dependents.

I am aware I have to pay Benefit in Kind on this but I seem to be deducted 62.17 per month which over the course of the year would equate to over 600 or half the annual premium which can't be correct.

The HR in work are absolute useless cretins and of no help.

I put on a query on PAYE anytime back in October asking about the deductions and asking if I was getting tax relief at source but I have received no response.

Does anybody have any thoughts?

poppers

it would be correct if you are on the higher rate of tax which i assume you are , you pay you 40% tax plus usc and prsi on the full amount.

Ninthlife

https://www.boards.ie/discussion/2058272278/how-much-bik-should-i-be-paying

Ensure that you are claiming the Medical Insurance tax credit

https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/health-and-age/medical-insurance-premiums/index.aspx

paul71

I am not certain you are looking at your payslip correctly. There is no-where on a payslip that will tell you how much PAYE/PRSI and USC is due specifically as a result of a Benefit in Kind.

Instead what is done is the value of the Benefit in Kind is added to your Gross Pay as "Notional Pay" and the tax is calculated on the combined total. In effect the extra tax paid is at your marginal tax rate, but it will not be shown as "BIK" tax on your payslip.

Sono Topolino

If your employer is paying your health insurance then this is a BIK and is taxable at your marginal rate of income tax, PRSI and USC. How much tax you will pay depends on what that marginal rate is.

Employers pay the insurance premium gross and the employee will have to separately apply for the medical insurance tax credit through their Revenue.ie MyAccount. The credit for an adult is €200 for a premium of €1000 or more. If you had applied personally for that policy for the insurance provider, you would have paid €84.15 per month net of TRS. Therefore, the BIK of €62.17 is not related to the difference between the gross and net of TRS premium. I would normally expect an insurance premium of €1,209.82 to translate into a BIK of €100.82. A BIK of €62.17 would correspond to a premium of €746.04 which as you say is clearly not correct.

Ultimately it is the responsibility of the Employer to administer payroll correctly as it is a fiduciary tax. Therefore, you should email your concern to your payroll department and that is the end of the matter. Also, you should apply on Revenue.ie MyAccount for a tax medical insurance credit for the full value of the premium.

https://www.boards.ie/discussion/comment/119889258#Comment_119889258

I didn't join the scheme for the first two months I worked there but did in March.

In my January and February wages I received 62 more than my next 8 monthly payments.

A BIK amount referencing 120 pm appeared in March and as mentioned I began receiving 62 less each month?

https://www.boards.ie/discussion/comment/119889236#Comment_119889236

I am in the higher rate of tax but I was in my last job too and am certain I wasn't being deducted this much.

https://www.boards.ie/discussion/comment/119889243#Comment_119889243

Yes I plan to do this in January 2023. I am not sure if I am receiving tax relief at soure. I was in my old job but as I said HR are gimps and will do nothing to assist.

paul71

https://www.boards.ie/discussion/comment/119889337#Comment_119889337

It sounds about correct given those figures. Your benefit from the company is €1,209 for the the year. You will work for the company for 10 months in the year. €1,209 / 10 =€120.90 Benefit in Kind per month. Marginal Paye tax rate 40%, USC 4.5%, PRSI 4% = 48.5%

However that is assuming there have been no other changes in your credits/bands.

Sono Topolino

https://www.boards.ie/discussion/comment/119889341#Comment_119889341

Employers will do one of two things:

1. Add the BIK amount (€100.82) to your salary on the left column and deduct a corresponding amount of income tax, PRSI and USC. They haven't done this.
2. Increase your salary to reflect the health insurance premium, then deduct the cost of the insurance scheme from your salary as a "salary sacrifice". As this is not a Revenue approved salary sacrifice scheme, they will still need to tax you on the full salary before the deduction. Therefore they deduct two amounts:
   1. Payroll taxes - this goes into the overall PAYE figure on the right column.
   2. Health insurance "benefit" after tax.

It doesn't really matter how they choose to report the BIK as long as the right amount of tax is paid. If you paid tax of €38.67 per month on the premium, then a deduction of €62.17 makes sense.

Sono Topolino

https://www.boards.ie/discussion/comment/119889337#Comment_119889337

Are you married? If yes, if your wife using your standard rate band? Check your tax credit certificates on Revenue.ie's MyAccount and also make sure you're claiming a tax credit for medical insurance.

A BIK amount of €120 per month means that the premium is actually more than €1400. The premium you referenced earlier of €1209 must be the amount after TRS of circa €200. You must be paying tax at the 52% rate (including PRSI and USC).

Great thanks for the feedback lads very helpful just wanted to make sure I wasn't being robbed.

Based on the above is it likely I am getting Tax Relief at Source or will I be able to claim my 200 in January?

Sono Topolino

https://www.boards.ie/discussion/comment/119889464#Comment_119889464

A BIK amount of €120 per month means that the premium is actually more than €1400. The premium you referenced earlier of €1209 must be the amount after TRS of circa €200. You must be paying tax at the 52% rate (including PRSI and USC).

The BIK amount is always calculated gross - TRS is not included. You should claim a tax credit for medical insurance immediately and it will be added to your tax credits. This means you will not have to wait until January to get the benefit of it.

Sono Topolino

Also when claiming the tax credit, you should make sure that you state the higher figure (based on 120 per month x 12) rather than the €1209 figure.

paul71

https://www.boards.ie/discussion/comment/119889476#Comment_119889476

There are actually 2 possibilities here Sono. The gross premium is €1400 divided over 12 months as you say, or the gross premium is €1209 and as it commenced in March is divided over 10 payslips instead of 12.

Thanks lads I feel like one of the Rothschilds with this quality financial advice.

The premium is definitely 1,200 per annum not 1,400 looking at it here on screen and yes would imagine its divided over the ten pay slips.

I will try claim this 200 tax credit later on PAYE anytine and let you know.

relax carry on

https://www.boards.ie/discussion/comment/119889437#Comment_119889437

Just on the point it doesn't matter how the employer reports the BIK. It actually does as the employer has to identify the BIK paid as medical insurance premiums in their payroll submissions to Revenue. Without that on file the employee will have difficulty claiming the tax relief due on employer paid medical insurance premiums.

Sono Topolino

https://www.boards.ie/discussion/comment/119890374#Comment_119890374

I meant report on a payslip. OP also clarified that the value of the BIK was €120 per month and the tax paid on it was €62 per month so it's clear now what was happening.

Sono Topolino

https://www.boards.ie/discussion/comment/119889542#Comment_119889542

This should be fine provided you joined the scheme effective 1 January, but they did not start operating PAYE on it until March. But as you joined the scheme in March (and did not enjoy the benefit of the scheme in January and February), I find it that your employer is dividing a 12 month premium over 10 months. I'd suggest raising this with HR because you are likely being over-taxed.

In any case the cost of the scheme from 1 March until 31 December should still be €1000 so there is no harm in claiming the full €200 credit.

https://www.boards.ie/discussion/comment/119890760#Comment_119890760

No to clarify I joined the scheme in January but did not start being taxed/deducted om it until March for some reason hence it seemingly being divided by 10 rather than 12 pay checks.

It was much easier getting this info from you lads rather than HR/Payroll at work.

Sono Topolino

https://www.boards.ie/discussion/comment/119891060#Comment_119891060

Glad to hear it. To be fair, PAYE is so automated these days that a lot of people involved in the process don't fully understand how it works and therefore cannot tell you more than "the system spat this number out". Also since PAYE modernisation, all payroll systems automatically apply the information Revenue provide regarding standard rate bands and tax credits. This is good because it reduces the risk of human error, but also means that your payroll team can't tell you much besides "contact Revenue".