PHI Group Income Protection

Eddiee

Hi,

Can anyone tell me if I should be paying Income Tax on the payments I receive from my companies PHI Group Income Protection scheme. My company but in the claim each month and then pay me minus the Income Tax and NI plus they pay employers NI. Is this correct?

The reason I ask is because I have seen some articles on the Internet stating that monthly benefits are paid tax free.

I have found this article on goverment site, which has the following statement; “If it were taxed as a benefit the employee would have, in effect, paid the premium out of taxed income. Payments received under the policy would therefore be exempt.”

http://www.hmrc.gov.uk/manuals/iptm/IPTM6120.htm


Regards

cash99

These policies can be set up so that the employee either pays tax on the premiums, by them being declared as a benefit in kind on their P11D or by paying tax on any payments made under the policy. In the latter case the payment is made to the employer who then uses the money to pay the employee their salary which is taxed in the normal manner.

Eddiee

Hi,

Thanks for the reply.

I believe that I did pay tax as a benefit in kind and it was declared on my P11D. Payment of the benefit is made to my employer first, who then pays me after taxing it.

Is that all that is required for the benefit payments to be tax free, or is there something in the policy it's self that means I pay tax?


Regards

cash99

It's a while since I was involved with one of these policies, but you should definitely not be taxed on both the premiums and the payouts. It is more ususal for the policy to be set up so that the employer is essentially the beneficiary and any money they receive under the policy is compensation to offset any salary payments they make to you. Hence the payment to you is taxable.

If you have paid tax on the benefit and are being taxed on payments then this is probably wrong, and you need to speak to your employers.

Eddiee

Hi,

Thanks for the reply.

I will ask my employers to have a look into this and contact my tax office to get there view on this.

Regards