'Record breaking’ amount of IPT collected as premiums rise

The government collected a “record breaking” amount of insurance premium tax (IPT) during the 2023/24 financial year, a new analysis of HMRC tax receipts data by actuarial consultancy OAC has revealed.

Published today (23 April 2024), the data showed that £8.1bn was collected during the year, up 11% on the £7.3bn generated in 2022/23.

Cara Spinks, head of insurance consulting at OAC, said the full year HMRC figures confirm “yet another record-breaking year for IPT driven by rising insurance premiums”.

Economic factors, such as inflation, have driven up premiums over the last year, especially in the personal lines market.

For example, figures published by Pearson Ham on 2 April 2024 revealed that the average price of home policies were recorded at £400 in Q1 2024, 10% higher than the previous quarter.

Spinks also said that 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 reenter the workforce and these products support early intervention by tackling the root cause and enabling people to remain in work.”

Calls for reduction

IPT applies to most general insurance policies including motor, home, pet and private medical insurance.

Its current rate sits at 12%, but Biba has been calling for the government to cut this figure to 10% and exempt strategic lines.

In 2023, the ABI also called on the government to reduce the rate of IPT from 12%, stressing that it had been “increased rapidly”.

“Reducing or removing IPT would be a step in the right direction, making these products more affordable and increasing accessibility,” Spinks said.