Cara Spinks, Head of Life and Health at Broadstone: “As the UK faces rising economic inactivity due to ill-health and increasing pressure on the NHS, the role of private health insurance – particularly through the products that mutuals provide – has never been more vital. Yet Insurance Premium Tax (IPT) continues to act as a barrier for access to health insurance products, undermining both public health goals and the government’s ambition to double the size of the mutual sector.
The hidden cost of protecting the public’s health
“IPT currently stands at 12% for most health insurance products, including Private Medical Insurance (PMI) and Health Cash Plans. This tax is embedded within premiums, making policies less affordable for individuals and employers alike. According to previous analysis of the mutual and not-for-profit sector performed by Broadstone, IPT added £98 million in costs to policyholders in 2022 alone and this figure will have risen in the period since. If IPT were to be abolished, uptake of these types of policy is likely to increase due to improved affordability. A 20% increase in policy uptake could potentially unlock an additional £65 million in benefits annually to the state even after accounting for lost tax revenue.
A strategic opportunity for the Treasury
“Far from being a fiscal loss, removing IPT on health insurance could be a strategic investment. A targeted tax cut would help individuals access treatment faster, reduce the NHS burden, and boost workforce productivity which would ultimately offset any tax loss through economic gains.
Supporting mutuals and the government’s growth agenda
“Mutual insurers play a unique role in complementing the NHS and the welfare state. Their not-for-profit structure allows them to reinvest in member benefits and community health. However, while general insurers and large providers can leverage economies of scale across central costs, IPT disproportionately impacts smaller mutuals. Removing IPT would empower mutuals to expand their reach, innovate their offerings, and contribute meaningfully to the government’s goal of doubling the mutual sector.
A call to action
“Abolishing IPT on health insurance is not just a tax reform; it’s a public health intervention, a productivity booster, and a mutual sector enabler. It’s time for policymakers to recognise that taxing health is taxing growth – and to act accordingly.”
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