With the change to tax relief at source, VHI and BUPA subscribers will soon see their annual premium decrease by 20 per cent. The percentage of the population covered by private health insurance has more than doubled in the past 20 years. The current estimate from the Department of Health is 45 per cent. Up to April 2001, tax relief for medical insurance premiums at the standard rate of income tax is given through the tax system in the year following the year in which the premium was paid.

From April 6th 2001, this tax relief will be granted at source in the year of subscription. At a standard rate of income tax of 20 per cent, subscribers will pay a reduced premium - 80 per cent of the gross amount - to the health insurer and the insurer will claim the tax relief back from the Revenue.

For example, a subscriber who would normally be billed for a gross annual premium of £500 on the renewal date of 1st May 2001 will now be billed for £400 under the new scheme.

The new scheme will apply to existing policies that are renewed on or after April 6th and to new policies taken out after that date. There will be an overlap in the coming short tax year where relief for medical insurance premiums will be given at source as well as through the tax system.

One drawback of the old system was that many people never got around to making the claim for tax relief. Others were not getting any relief because their taxable income was not high enough to avail of it.

Under the new relief-at-source system, from April 6th 2001, a person who pays no tax will also be entitled to reduced insurance premium payments. Enquiries in relation to the new relief-at-source scheme should be made to the TRS section at Sarsfield House, Francis Street, Limerick - locall 1890 463626.