You may be aware that Insurance Premium Tax (IPT) is due to increase on 1st June 2017 to 12% from 10%.
This is the third increase in IPT in 15 months and is a concern (the suspicion is that IPT is destined to match VAT).
What is Insurance Premium Tax ?
Although VAT is the most common form of tax it is not applied to Insurance Premiums (car, travel, household appliance, health insurance). Another tax applied to insurance premiums called the Insurance Premium Tax. Many people don’t realise they pay this tax as it is included in the premiums. For every £1000 in insurance premiums paid the Government receives about £120 in tax.
We are concerned with the level of IPT on certain employee benefits such as private medical insurance and health cash plan schemes. Especially when an employee is provided these benefits as ‘Benefit in Kind’ perk as the they pay tax on the equivalent value of the premium including IPT.
If IPT continues to increase it is possible that some employers may decide to stop providing benefits such as private medical or health cash plans to their employees although it’s a highly valued benefit to employee and a useful business tool for employers.
We also know that individuals generally would not privately pay their own private medical insurance premiums due to cost. The NHS is already stretched both in terms of demand and funding therefore the more people who cancel their private health policies will simply exacerbate the problem.
As an employer, who funds health benefits to staff, we would like to draw your attention to a Government petition to have Insurance Premium Tax exemption applied to certain health related insurances including Private Medical Insurance and Health Cash Plans. With sufficient support the petition will allow the industry to hold a meaningful debate with leading experts and the Government on why Health & Wellbeing insurance should be excluded from IPT.
You could extend this message to your staff to encourage them to sign the petition. The more signatures, the likely the debate and discussion will happen.