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What is IPT and Why is it so Much?

George Blandford

August 6, 2024

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Understanding Insurance Premium Tax

Insurance Premium Tax (IPT) is a tax levied by the government on general insurance premiums. Introduced in 1994, IPT was initially set at a rate of 2.5%, but over the years, it has seen several hefty increases.

Currently, the standard rate of IPT stands at 12%, with a higher rate of 20% applied to travel insurance and certain insurance for vehicles and property. This tax is designed to generate revenue for the Treasury from the insurance industry, impacting various types of insurance including health. You can’t charge VAT on insurance, so it’s basicallt an alternative way for the government to continue collecting cash.

IPT Collections and Private Healthcare Demand 

Last year, the UK saw a record £8.1 billion in IPT collections, and June 2024 alone contributed £69 million to this figure. 

For the first quarter of the 2024/25 tax year, IPT receipts reached an unprecedented £2.1 billion, which is £235 million (12.5%) higher than the same period last year. This marks an all-time high for the opening quarter, reflecting the rising demand for private healthcare services. 

But Why Has it Increased?

NHS waiting lists are still at near-record highs, with 7.6 million individuals awaiting treatment. This backlog has significantly driven the demand for private healthcare to record levels. The majority of individuals accessing private healthcare do so through insurance products such as Private Medical Insurance.

Previous governments raised the rate of IPT four times, more than doubling it from 5% in 2011 to the current rate of 12%. In the 2023/24 financial year, IPT generated £8.1 billion for the Treasury, marking the third consecutive year of record annual sums and an 11% increase from the previous year. This growth is primarily due to rising premiums across the insurance market and the increased uptake of private medical insurance by UK businesses and households

What are Labour Going to do About it?

The new Labour government has set ambitious goals to drastically reduce NHS waiting lists, and the private sector will inevitably play a crucial role in alleviating the pressure on public health services. However, costs remain a significant challenge in this market. It’s a great time to see if you can reduce what you pay, so feel free to get in touch with the MyHealthPal team for a free, comprehensive assessment.

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