A special tax on taking personal responsibility and doing the right thing is a bizarre concept. But that, in a nushell, is IPT. Other taxes are supposedly a punishment for smoking, drinking, driving in a city, or buying an item with VAT on it. In essence they are like a big stick, used to modify behaviour. But IPT is unique in that it goes some way towards making people stop paying car insurance altogether, or manipulate their own data to obtain a cheaper quote. The higher it goes the more it actually prompts illegal behaviour, which impacts us all when uninsured drivers collide with buildings, vehicles or people.
For the UK governments, of all hues, it is a nice earner. The latest HMRC tax receipts data for the full year 2023/24 show Insurance Premium Tax (IPT) collected a total of £8.1 billion, a record annual total for the third successive year. Receipts were up 11% on the £7.3 billion generated in 2022/23 with the OBR expecting revenue from IPT will continue to grow, forecasting receipts of £8.8bn by 2028/29.
Cara Spinks, Head of Insurance Consulting at leading actuarial consultancy OAC, commented: “The full year HMRC figures confirm yet another record-breaking year for IPT driven by rising insurance premiums. There is growing evidence that premium inflation is slowing but, amid record waiting lists and economic inactivity due to long-term illness, demand for health insurance continues to increase as employers look to protect the wellbeing of their workforce.
“Costs remain a challenge for this market so we would like to see a commitment from the government to reducing or removing IPT on health insurance products such as PMI and health cash plans. It is well understood that the longer an individual is off sick, the harder it is for them to re-enter the workforce, and these products support early intervention by tackling the root cause and enabling people to remain in work.
“Reducing or removing IPT would be a step in the right direction, making these products more affordable and increasing accessibility. More employees would get access to the healthcare they need to be productive at work, reduce absenteeism and increase productivity, all the while reducing the pressures on public health services.”
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