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ABI urges chancellor to cut IPT on health insurance

The Association of British Insurers (ABI) has called for a reduction in the Insurance Premiums Tax (IPT) rate for health Insurance

A photo of Daniel Sharpe-Szunko, the author

By Daniel Sharpe-Szunko

Published on: 9 March 2023

3 min read

ABI urges chancellor to cut IPT on health insurance to help consumers

A recent announcement from the Association of British Insurers (ABI) has called for a reduction in the Insurance Premiums Tax (IPT) rate for health insurance.

As further financial pressure on the National Health Service (NHS) increases there are calls for better solutions for other types of healthcare. The primary alternative to this being the Private Healthcare system, which is mainly made up of Private Health Insurance (PHI) providers.

The ABI called for a freeze on any further increases to the IPT rates in November 2022 as part of its support for consumers during the ‘cost of living crisis’.

What is Insurance Premium Tax (IPT)?

Insurance Premium Tax is a government levy that is charged on certain types of general insurance products. Premiums will be calculated including IPT and the charge is paid for by the policyholder to the insurer, and then collected by the government.

There are two different rates of IPT which are ‘standard rate IPT’ and ‘higher rate IPT’ that apply to certain types of insurance products.

Standard rate IPT (currently 12%) applies to:

  • Medical insurance
  • Car and van insurance (some policies are exempt or charged at higher rate)
  • Pet insurance
  • Home insurance

Higher rate IPT (currently 20%) applies to:

  • Travel insurance
  • Electrical appliance insurance
  • New vehicle car insurance (bought direct through a dealership)

Who is the Association of British Insurers (ABI)?

The ABI is a governing body that provides a platform for the UK’s insurance sector and long-term savings industry. The ABI represents more than 200 members which consists of companies and brands that provide protection to consumers around the UK.

About the ABI:

  • Originally formed in 1985 as a not for profit member funded organisation
  • More than 200 members
  • Responsible for more than £16bn of tax contributions by its members
  • Insurance sector provides over 320,000 jobs in the UK

The governments Insurance Premium Tax (IPT) levy was originally introduced in October 1994 to generate revenue from payment of certain insurance premiums in the UK. The tax applies to the majority of short-term annually renewable general insurance policies such as car, house, pet, travel and appliance insurances.

Table of historical IPT rates:

Rate change date% rate (standard rate IPT)% rate (higher rate IPT)
1st October ‘942.5%N/A
1st April ‘974.0%17.5%
1st July ‘995.0%17.5%
4th January ‘116.0%20.0%
1st November ‘159.5%20.0%
1st October ‘1610.0%20.0%
1st June ‘1712.0%20.0%

The call to reduce IPT on medical insurance in the UK comes in the run up to the next budget which is due on the 15th March ’23. The main aim of this reduction is to make private health insurance policies more accessible and affordable for businesses and private individuals.

A recent study that was commissioned by the ABI showed that more than two thirds (69%) of participants would make use of health insurance that was provided by an employer. The research was conducted by Public First and included feedback from 2,000 UK adults.

The provision of wider use of private health insurance policies would help to drive higher levels of care and faster treatment, therefore reducing the levels of ill health among the British public.

How to get health insurance

You can currently buy health insurance in the UK by speaking to a health insurance specialist who will be able to provide you with quotes from multiple insurance providers. You should also be aware that health insurance can be extremely confusing due to the amount of options that are available and the number of insurers to choose from.

Resources

Association of British Insurers (ABI) – Health insurance

Finder – Health insurance statistics

The Guardian – Private healthcare boom adds to fears of two-tier system in UK

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