Autumn Statement 2016: The standard rate of insurance premium tax (IPT) is to increase to 12% from 10% from June 2017.
The rise was announced by Chancellor Philip Hammond in his Autumn Statement speech today (23 November).
This increase is designed to raise revenue to help fund the commitments made by Hammond and the Conservative government in the 2016 Autumn statement. This includes investments in areas such as productivity, affordable housing and transport.
Carl Chapman, head of workplace health at Barnett Waddingham, said: “For the third consecutive Budget and Autumn statement, the Chancellor has announced an increase to insurance premium tax, this time raising the level from 10% to 12%. This means the rate of insurance premium tax has doubled in the past 18 months.
“The motor insurance industry is likely to be the most vocal about the latest increase, however employers should take note because, once again, they will be expected to swallow an increase in the cost of insurances, such as private medical insurance and dental insurance. The prior is already under intense scrutiny by some employers owing to multiple percentage point increases over the past few years.
“The average rate of insurance premium tax in Europe is between 15% and 20% and I fully expect us to creep up towards these levels over the coming years.
“Employers really need to start looking at mitigating the risk of future increases by exploring alternative funding methods, such as trust-based arrangements and fully integrated intervention solutions.”
Alex Perry, chief executive officer at Bupa Insurance, added: “This makes no sense. The government has announced three rises in less than two years on what is a completely misguided tax when it comes to health insurance. Government should support, rather than penalise, those using health insurance, which relieves the burden on a struggling NHS. Health insurance should be zero-rated like it is in many other countries, and like life or critical illness insurance in the UK.”