Rising insurance costs and a surge in demand for health insurance amid NHS crisis has boosted IPT receipts. The UK Government has also been urged to alleviate tax burden on insurers as they help to lessen NHS woes
Analysis of the latest HMRC1 data on Insurance Premium Tax (IPT) receipts by actuarial consultancy OAC (part of the Broadstone Group) reveals that the rising cost of, and growing demand for, health insurance products has boosted Treasury coffers.
The figures reveal that IPT receipts for the 2022/23 financial year reached a record £7.34 billion, an uptick of 11% from 2021/22 when the tax take stood at £6.63 billion, and a 18% increase compared to five years prior with £6.2 billion collected in 2018/19.
The start of 2023/24 has maintained the rapid rate of IPT collections and looks set to surpass the Office of Budget Responsibility’s (OBR) expectations. Through the first four months of the year, IPT receipts totalled £2.76 bn – a 27% increase compared to the same period last year (2022/23).
If full-year IPT receipts surpass the levels seen in 2022/23 by the same proportion, they would reach £9.32 billion. For context, the OBR2 predicted in March that IPT would raise £7.6 billion in 2023/242.
Cara Spinks, Head of Insurance Consulting at OAC, commented: “There appear to be two main drivers for the growth in IPT receipts. The first is the inflation in premiums due to increased healthcare costs which feeds directly into tax receipts for the Treasury.
“The second is the increase in demand for private health insurance due to the currently overburdened NHS, which is driving individuals and employers to arrange additional cover.
“Long-term sickness in the UK is increasing and the industry is calling for a reduction in the rate of IPT to make premiums more affordable. Economic inactivity is a significant headwind on the UK economy and, whilst the Treasury might take a short-term hit on IPT receipts, over the longer-term minimising IPT could, conversely, pay for itself through increased productivity from an able and healthy workforce, and economic growth.”
