Income Protection 1.3 (too PHI and Pensions)

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What is Income Protection?

Your income is probably your most important asset. It funds your whole lifestyle from what’s in your fridge to where you go on holidays. Your children depend on it from birth, right through to college and often beyond.

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Why do you need it?

• Income Insurance, also known as income protection, provides you with a replacement income if you cannot work because of an illness or injury after a certain period of time.

• You can take out income insurance if you are in full-time work or are self-employed and earn an income.

• The maximum benefit payable is now €250,000, previously this was €150,000. Benefits paid are less any State benefits or other income protection plans.

• The maximum benefits payable is 75% of total yearly earnings, less any State benefits or other income protection plans.

• It protects you only in these circumstances – it will not be paid if you become unemployed. You must keep up your payments to stay on cover.

• It can pay out after 8, 13, 26, or 52 weeks following an illness or injury, you choose Up to certain limits, tax relief is available on your premiums at your marginal rate of tax. This can reduce the cost of your cover by up to 40%*

 

Inheritance Tax Planning   

Section 52 Inheritance Tax refers to a specific provision under the Capital Acquisitions Tax (CAT) legislation in Ireland, which governs inheritance tax. Section 52 is primarily concerned with the taxation of gifts and inheritances when a person inherits or receives a gift from someone who is not a direct relative (e.g., not a parent, child, sibling, etc.).

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Key Features of Section 52 Inheritance Tax

1. Thresholds and Rates:

   • Section 52 sets out the thresholds for inheritance tax, determining the amount an individual can receive without incurring tax. These thresholds are dependent on the relationship between the beneficiary and the deceased (or donor).

   • Class A: Parents to children (higher threshold).

   • Class B: Siblings and nieces/nephews (lower threshold than Class A).

   • Class C: Friends or distant relatives (lowest threshold).

   • If the value of the inheritance or gift exceeds the applicable threshold, inheritance tax (currently at 33%) applies to the excess.

2. Relief for Business and Agricultural Assets:

   • Section 52 includes exemptions and reliefs, such as Agricultural Relief and Business Relief, which can significantly reduce or eliminate the inheritance tax payable on inherited farming or business assets.

3. Valuation:

   • The tax is assessed based on the market value of the inherited or gifted asset at the date of transfer.

4. Payment Deadline:

   • Inheritance tax must be paid within 4 months from the date of inheritance or receipt of the gift, with certain exceptions for agricultural property.

 

Conclusion

Section 52 of the Irish Inheritance Tax laws plays a key role in determining how inheritances or gifts are taxed, particularly in terms of thresholds, tax rates, and exemptions. It aims to ensure fair taxation of assets received through inheritance, while providing reliefs for certain assets, such as agricultural property or business interests, to avoid excessive tax burdens on those assets.