The Treasury collected record revenues from insurance premium tax (IPT) in the first half of this year, and has seen a strong increase in receipts from inheritance tax (IHT) and capital gains tax (CGT) according to HMRC data.
These figures come just a week before Rachel Reeves’ first budget as Chancellor, where she is widely expected to further raise taxes to plug a £22bn black hole in the nation’s finances. This could include changes to raise more money from each of these three taxes, given manifesto pledges not to increase income tax, national insurance and VAT.
IPT receipts hit a half-year record of £4.5bn in the first six months of the financial year — a 13 per cent increase on the same period last year.
The figures show this increase is being driven by the rise in insurance premiums, and continued demand for private medical insurance and healthcare cash plans, amid ongoing problems accessing NHS services.
A decade ago, the total receipts collected in this six-month period was just £1.5 billion.
The HMRC figures also show that IHT receipts rose by 10.3 per cent over this period to £4.3bn. Meanwhile CGT receipts for the three months from July to September were up by 16.3 per cent.
A modest recovery in house prices and the frozen nil rate bands for IHT, which have not moved since 2017, is helping boost this tax take for the government. Meanwhile speculation about changes to CGT has prompted an increase in people disposing of assets – helping create a short-term tax boost for the government.
Overall these HMRC figures show income tax, capital gains tax and NICs receipts for April 2024 to September 2024 are £226.8bn, which is £6.2bn higher than the same period last year.
Broadstone head of life & health Cara Spinks says: “As we head towards the Autumn Budget, the temptation for further hikes to be made to IPT is clear.” Nut she says the longer-term implications of any further hike must be considered carefully.
“With more employers turning to PMI and health cash plans to support the health of their workforce many are seeing healthcare cost increases — with some employers seeing spikes of over 50 per cent.
“While IPT provides a lucrative revenue stream for the Treasury, further increases may force some employers and individuals to reconsider this private healthcare, due to unsustainable costs. This could impact an already overstretched NHS, adding to the current backlog and exacerbating more complex health issues, particularly as one of the key benefits of these policies is to promote preventative healthcare, and support early screening and diagnosis.” This could counter the government broader goal of reducing economic inactivity caused by ill health, says says.
Evelyn Partners tax partner Laura Hayward says: “It is unlikely that this last update on monthly revenues will have any impact on the Chancellor’s plans for the Budget, which will be determined by fiscal projections and rules over the next five years.
“But rising tax receipts can tell their own story about what Rachel Reeves is considering for the Budget in order to raise an estimated £35bn, particularly in the case of inheritance tax, capital gains tax and income tax.’
Hargreaves Lansdown head of retirement analysis Helen Morrissey adds: “The countdown to the Budget is well and truly on and the government has made no secret of the fact it’s going to be painful. The tax take has already been on the rise but come 30 October we can expect it to increase still further.”