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Is Tax Liable on Life Insurance Payouts in Ireland?

I was woken up by a phone call telling me I’ve committed tax fraud.

They must have had the wrong number ’cause I don’t pay taxes

That’s all I got folks.

I scoured the internet, and that is the best tax joke I could find to introduce the most boring of subjects.

Do you have to pay tax on a life insurance payout in Ireland?


It depends on the relationship between the insured and the person getting the claim’s proceeds.

Let’s look at the case of JR and Sue-Ellen.

She had a life insurance policy in her name for a cool €10 million.


If JR was lucky enough to have married Sue-Ellen before she popped her clogs, then he won’t pay any tax.

Not Married:

However, if there were no wedding bells, then in the eyes of Revenue, they are strangers, and he’s gonna be hit with a whopper tax bill on the life policy.

How much is life insurance taxed?

The proceeds of a life insurance policy are taxed at 33% less the current CAT threshold you can see below:

CAT Thresholds Ireland 2020

The above in plain English:

  • Children of the deceased don’t pay any tax, assuming they receive less than €335,000 in their lifetime. Anything above this is taxed at a whopping 33%
  • The dead person’s brothers, sisters, nieces, and nephews can receive up to €32,500 tax-free but pay 33% tax on the balance.
  • Everyone else gets €16,250 tax-free and pays 33% on the balance.

So if JR didn’t manage to get married, unlucky, he will have to South-fork out 33% tax on the value of the life insurance policy minus €16,250.

That’s a tax bill of 33% of (€10,000,000 – €16,750) = €329,447.25!

So the takeaway here is that you should get married to avoid paying tax on your partner’s life insurance….that, and love of course. ?

I wrote a previous article that will be of interest if you’re not married and considering life insurance.

Is life insurance tax deductible?

Personally paid life insurance policies are not tax-deductible, but you can get tax relief on Pension Term Assurance.

Also, if you’re lucky enough to be a company director and your company pays your life insurance premiums, the premiums may be a tax-deductible expense.

Do you pay taxes on life insurance proceeds?

Proceeds = payout, so see above for the explanation 🙂

Do you pay tax if you invest the payout of a life insurance policy?

Yes, any gains on the investments of the proceeds of a life insurance policy are taxable at 41%.

This exit tax here in Ireland has risen steadily since 2001:

rate of exit tax in ireland since 2001

And you thought having to pay 33% tax was harsh.

Do you pay tax on a monthly income life insurance policy?

Similar to a lump sum payment from a life policy, the monthly income would be paid out tax-free to the deceased’s estate.

If these monthly amounts were invested by the beneficiary, any growth would be taxed at a rate of 41%

Is tax liable on a mortgage protection policy?

Again, it comes down to your marital status.

There is no tax liability between married couples/civil partners, so there are no tax implications on mortgage protection policies.

However, if you are buying as a cohabiting couple, there are some pitfalls you can avoid. Here’s a previous article on mortgage protection for cohabiting couples.

Over to you…

Do you have any further questions about the tax implications of life insurance, or are you looking for the right life cover for you and your family?

Call us today or fill out this questionnaire and we’ll be in touch asap with our free, no-obligation recommendation.

Thanks for reading


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