Getting a Tax Break on your Insurance
Getting A Tax Break On Your Insurance
One of the advantages of owning a business is the many tax deductions that aren’t available to employees. Most of these deductibles are well known, like vehicle and home office costs and other basic business expenses.
But recently we’ve been able to help out our clients with one that’s a little less well-known: income protection insurance.
Income protection insurance is tax deductible
Income protection insurance is there in case you can’t work due to a serious illness or injury. If that happens, your insurance will kick in and you’ll receive a monthly payment that covers some of your lost income (usually around 75%).
If you have income protection insurance, it may be tax deductible. Check the wording of your policy: most are tax deductible, and you pay tax on the income produced if you claim. If your policy is like this, claiming your tax back effectively reduces the cost of your cover by up to 39%, depending on your tax position.
Many business owners miss the chance to include income protection insurance on their tax returns. Sometimes they don’t know they can. But more often, the premiums come out of a personal account, lumped in with other types of non-deductible personal insurance like life and trauma cover, so they don’t get flagged as a business cost.
Other types of insurance are also deductible
There are additional types of business insurance that also have tax deductible premiums, including public liability insurance, building insurance, commercial vehicle insurance and loss of profit insurance. It’s uncommon for these to be missed on your tax return because these premiums are almost always paid by the business. If you think we may have missed one, do let us know.
You might be able to claim a refund
A refund may be possible for more than one year if you haven’t been claiming your income protection insurance on your tax return. With some help from your insurer or insurance broker, a statement showing your payments can allow us to get this right with Inland Revenue for the past few years, and sort it out for the year ahead.
Let us know if you pay this type of insurance from your personal accounts and we can help you claim it correctly.
Need help? Get in touch – we’re here to help!