Scrap insurance premium tax

Alex Perry

Alex Perry

Last year Boris Johnson, our now Prime Minister, said that employers protecting their workforce's wellbeing should be 'rewarded' with tax breaks.

He pointed out the folly of taxing this responsible behaviour rather than encouraging it and said he would look to work with HM Treasury to find a solution. 

The solution is blindingly obvious.

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Scrap Insurance Premium Tax (IPT) on health insurance. 

This tax not only flies in the face of the government’s ‘prevention’ health agenda – which seeks a more proactive role from employers – but has actively driven businesses away from covering the health of their people. 

Independent research we commissioned recently clearly shows this.

One in three small businesses have chosen against or cancelled their health cover because of the price increases caused by the doubling of IPT since 2015.

That is the equivalent to 420,000 businesses and 3.63m employees uncovered specifically because of Insurance Premium Tax.

It means millions more people relying on an already over-stretched NHS and facing a longer period to get back to work after illness or injury. 

And things could get worse.

As understanding of Insurance Premium Tax as a ‘tax on the responsible’ increases, business decision-makers are digging their heels in.

With most of SMEs (82 per cebt) that cover their colleagues saying they will consider cancelling such benefits if this tax is increased much more at the next budget. 

You see, we now have the second highest rate of tax on health insurance in Europe, second only to Greece.

And when Insurance Premium Tax is considered alongside National Insurance and Benefit in Kind taxes, the total tax rate facing businesses that want to invest in their employees’ health is between 50 per cent and 72 per cent for each person - depending on whether their employees are basic or higher rate earners.

In fact, businesses are paying taxes on taxes as the different levies on health insurance multiply.

Not surprising then that more than three quarters of business owners (76 per cent) see this tax as hypocritical, according to the same research.

I am not alone in pointing this out.

The Association of British Insurers (ABI) continues to shout loud and clear that this tax should be cut.

The British Insurance Brokers Association (BIBA) is demanding ‘at least a freeze’ and the Association of Association of Medical Insurers & Intermediaries (AMII) has said that ‘the real impact on business can no longer be ignored’. 

I am hopeful that this message will get through.

No prime minister has been so explicit in referencing the incongruity of taxing health insurance when employers are being asked to play a greater role in keeping their workforce well – both mentally and physically – in order to help tackle the UK’s pronounced productivity problem.