UK Budget: Rachel Reeves makes no mention of IPT in speech to Commons

UK chancellor Rachel Reeves has laid out the recently elected Labour government’s financial plans in the Autumn budget today (30 October 2024), noting that she would raise taxes by £40bn across the economy while increasing investment into the country’s public services. 

However, despite the need to raise extra funds for increased spending, her speech to the House of Commons made no mention of an increase to insurance premium tax (IPT). 

IPT is a tax on the price of an insurance product and functions as an indirect tax on consumers and businesses that is collected by insurers and paid to HMRC. The rate currently sits at 12% and will not go up under this budget.

Prior to this budget being delivered, Ageas chief executive Ant Middle said: “With the continued focus on insurance pricing, we would like the chancellor to recognise the financial burden that this tax has on households and consider all options to help firms make cover more affordable for customers.”

In its submission to the Treasury ahead of the Autumn Budget, Biba also called for the new government to cut the headline rate of IPT from 12% to 10%,

Commenting on the decision to keep IPT rates where they were, Starpeak Insurance Solutions founder and managing director Julian Hucks said: ”The government has missed an opportunity to help the UK’s small businesses by not announcing a reduction in Insurance Premium Tax (IPT).”

SME impacts

Reeves also announced that employers’ national insurance (NI) contributions would rise from 13.8% to 15%.

In addition, the threshold at which businesses start paying NI on a workers’ earnings will be lowered from £9,100 to £5,000.

Hucks added: ”The announcement of a 1.2% increase in NI contributions demonstrates again that the concerns of small businesses have been largely overlooked. With rising operational costs, many small businesses may have to rethink their hiring approach and will face difficult decisions to maintain financial stability.

“Cutting back on insurance may be tempting for small businesses as they look to shave costs, but it will leave them exposed to substantial risk. Instead of sacrificing insurance cover completely, small businesses should explore more tailored and competitive insurance options. By doing this, organisations can remain protected in a way that is most aligned to their budgets and specific needs.”

Nikki Lidster, head of SME at Zurich, said: ”An increase in employer’s NI contributions to 15% in April 2025, alongside the increase in the national living wage to £12.21 per hour and the reduction in the allowance to £5000, despite the reform to the employment allowance, will hit small and medium-sized enterprises (SMEs) hard at a time when many are already struggling to make ends meet.

”While the increase in NI will raise significant revenue, the lack of time to prepare will mean many small businesses could struggle to forecast the impact of the increase on their longer-term financial planning.

”An increase such as this could mean SMEs won’t be able to invest in business development, new and existing talent or fulfil expansion plans in the future.”

Pothole funding 

In her speech to the House of Commons, the chancellor also noted that the government would commit an extra £500m a year to local road maintenance and the fixing of potholes in 2025-26.

In its election manifesto, the Labour Party committed to fixing an extra one million potholes a year. 

Henry Topham, managing director of Allianz’ retail business, said: ”The government’s announcement of increased spending on repairing the nation’s roads is welcome.

”Our roads are blighted by potholes and it is astonishing to see how much damage they cause and the increase in frequency and costs of claims are among factors that have contributed to increased motor insurance premiums.

“The government has recently pledged to deliver on its promise to support local authorities to fix one million more potholes a year and this increased funding will help achieve that goal.”

• Insurance Times will update this story with a report of the budget’s impact on the insurance sector and analysis of the decisions as they come in.