A cap on tax relief on health insurance will hit families with average-priced policies, but will affect those with “gold-plated” policies the most.

From tomorrow, tax relief on health insurance premiums, which is available at 20 per cent, will be restricted to the first €1,000 per adult, and €500 per child, spent on a policy.

The portion of any premium that exceeds the new thresholds will not qualify for tax relief. The move is expected to bring in €127 million in revenue a year.

“This will restrict the exposure of the exchequer in relation to premiums paid for ‘gold plated’ medical insurance policies, while not affecting the majority of individuals who avail of more standard levels of medical cover,” Minister for Finance Michael Noonan said.

But despite the high thresholds, given the rapid rise in the cost of health insurance, the move will likely hit the average family on a mid-priced plan.

A family on the VHI's mid-priced One Family plan, for example, will be hit by
the cap, given that the full
cost of an adult on the plan comes in at €1,206, although children are below the cap,
at €327.

As a result, the reduction in tax relief will push the net cost of cover for an adult up from €965 to €1,006.