When your employer calculates your PAYE, certain amounts are subtracted from your pay tax is applied. This guide explains which insurances count as deductions, how they reduce your tax, and what is taxable vs non-taxable.
For PAYE purposes, three types of insurance reduce the amount of your pay that is taxed. All three are -- they lower your chargeable income before tax is applied.
National Insurance Scheme -- a government social security programme
Employee portion (5.6% of insurable pay)
Private life insurance (e.g. term life, whole life)
Premiums paid by employee, or by employer as benefit in kind
Private health or medical insurance (medical and life)
The deduction applies to premiums paid by the employee. Where the employer pays the premium as a (included in your salary), that amount is also deductible. The deduction is limited to the : premiums paid, 10% of gross salary, or $50,000 per month ($600,000 per year).
Even if you have (spouse or partner) or (employee + dependents) coverage, is non-taxable for PAYE. The portion that covers your spouse or dependents is not deductible, regardless of who pays it.
A family health plan costs $15,000 per month; you pay $8,000 from your salary. Only the amount attributable to your own coverage (not your spouse or children) is deductible. That amount is also subject to the cap (lesser of premiums paid, 10% of gross salary, or $50,000/month).
These amounts are subtracted from your gross pay before PAYE is calculated:
NIS employee contribution
Based on insurable income (max $280,000/month)
Life insurance (employee-paid)
Lesser of: premiums paid, 10% of gross salary, or $50,000/month ($600,000/year)
Health insurance (employee-paid)
Lesser of: premiums paid, 10% of gross salary, or $50,000/month ($600,000/year)
$10,000/month per child under 18 (pro-rated for other frequencies)
First $50,000 per month tax-free
First $50,000 per month tax-free
These count as taxable income for PAYE:
Basic pay, allowances, bonuses
Overtime above $50,000/month
Only the amount exceeding the monthly limit
Second job income above $50,000/month
Only the amount exceeding the monthly limit
Employer-paid premiums (not as benefit in kind)
Not deductible; employer pays directly, not included in your salary
The order of operations when calculating PAYE is:
-- your total pay for the period.
-- up to $50,000 per month (shared across pay periods if you are paid more than once a month).
-- up to $50,000 per month (same sharing rule).
-- NIS + Life Insurance + Health Insurance (the amounts you pay).
-- if you have children under 18.
-- the tax-free amount for your pay frequency ($140,000 monthly in 2026, pro-rated for other frequencies).
-- 25% on the first portion, 35% on the rest.
The result after step 6 is your -- the amount that is actually taxed.
- Gross pay: $300,000
- NIS (employee): $15,680
- Life insurance (employee pays): $5,000
- Health insurance (employee pays): $3,000
- No overtime, no children
-- Gross pay = $300,000
-- No overtime. Adjusted pay = $300,000.
-- Subtract insurance contributions.
Total deductions = $15,680 (NIS) + $5,000 (Life) + $3,000 (Health) =
Pay after deductions = $300,000 - $23,680 =
-- Subtract tax-free amount ($140,000 for monthly).
Chargeable income = $276,320 - $140,000 =
-- Apply 25% (chargeable income is below the $280,000 bracket limit).
PAYE = $136,320 × 25% =
the life and health insurance deductions, the chargeable income would have been $144,320 and PAYE would be $36,080. The $8,000 in insurance deductions saves $2,000 in tax.
Employee contribution only
Premiums paid by employee (or employer as benefit in kind); cap: lesser of premiums, 10% gross, or $50,000/month
Basic pay, allowances, bonuses
Amount over $50,000/month
Amount over $50,000/month
Life/health insurance cap
$50,000/month ($600,000/year) or 10% of gross, whichever is less
For PAYE 2026, three types of insurance reduce your taxable income: , , and . The deduction applies to premiums paid by the employee (or by the employer as a benefit in kind). Even for plus-one or family plans, only the portion covering the employee is non-taxable. Life and health insurance deductions are capped at the lesser of premiums paid, 10% of gross salary, or $50,000 per month ($600,000 per year) per GRA Section 16(l). These amounts are added together and subtracted from your gross pay before the tax-free amount is applied. Child allowance, tax-free overtime (up to $50,000/month), and tax-free second job income (up to $50,000/month) also reduce your chargeable income. Gross salary, allowances, bonuses, and any income above the exempt limits remain taxable.