Money raised from insurance premium tax rose by 11 per cent over the past year, giving the government record revenues of £7.34bn from this tax.
Analysis by OAC, part of the Broadstone Group, points out that is a 18 per cent increase on the revenue generated five years ago from IPT.
OAC says this increase is being driven by the rising cost of insurance, particularly in the health insurance market where there has also been increased demand for these products.
HM Treasury looks set to get another bumper payout for this financial year, with IPT collection rising by a further 27 per cent in the first four months of the year, meaning it is on track to surpass forecasts set down by the Office of Budgetary Responsibility (OBR).
If receipts continue at this level, OAC calculates that IPT revenues will reach a new record of £9.32bn for the 2023/24 tax year, with the OBR predicting in March this tax would raise £7.6bn over this financial year.
OAC head of insurance consulting Cara Spinks says: “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.”
