A total of £2.76bn was raised in insurance premium tax (IPT) receipts in the first four months of the latest financial year, which is 27% higher than in the same period last year, OAC has found.
The actuarial consultancy, which is part of the Broadstone Group, has revealed that the rising cost of, and growing demand, for insurance products has boosted Treasury funds, with receipts hitting a record £7.34bn in the 2022/23 financial year, an uptick of 11% and 18% from 2021/22 and 2018/19 respectively.
The start of 2023/24 has maintained the rapid rate of IPT collections and looks to surpass the Office of Budget Responsibility’s (OBR) expectations.
If full-year IPT receipts surpass the levels seen in 2022/23 by the same proportion, they would reach £9.32bn. The OBR predicted in March that IPT would raise £7.6bn in this financial year.
Head of insurance consulting at OAC, Cara Spinks, said: “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.”
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