Broadstone, a leading independent financial services and employee benefits consultancy, is warning against the possibility of any increases to Insurance Premium Tax (IPT) at the upcoming Autumn 2025 Budget. The Government is reportedly exploring further revenue raising measures amid strained public finances and leading political figures have already called for increased taxation on private medical services.
In the year since Labour won the General Election, NHS waiting lists have seen gradual improvements, falling by over a quarter of a million people (253,912) from a record 7.62 million patients in July 2024 to 7.37 million patients in June 2025. However, the backlog remains at unprecedented levels after rapid increases in the wake of the global pandemic leading to significant growth in economic inactivity due to long-term illness.
Meanwhile, IPT receipts have soared in recent years, increasing by 9% to £8.9 billion in 2024/25. This rise has been driven by claims inflation across the insurance industry alongside growing demand for private health insurance and increasing healthcare claims costs due to more complex, expensive treatments being required as a result of delayed access to NHS care. This is reflected by record independent healthcare in-patient admissions, with the 939,000 admissions in 2024 marking the third year in a row this reached a new all-time high, driven by a growing number of admissions paid for by private medical insurance (PMI).
IPT, currently set at 12%, is charged on most insurance policies, including PMI. A higher rate of IPT would increase costs for both employers and employees, potentially leading to lower take up of the benefit and so reduced coverage levels across the UK’ s workforce.
For company-funded health benefits, like PMI and health cash plans, an increase to IPT would have a ‘double whammy’ impact. It would increase the cost to the employer funding the premiums, and because employees are taxed on the value of the benefit it would also increase the P11d tax liability and therefore increase the cost to the employee.
This means that that even if the employer feels they can afford the higher premium costs, employees may feel the need to opt out of the benefit if they feel they can't afford the additional tax – an issue that is likely to disproportionately impact lower-income workers.
Broadstone’s Head of Health & Protection, Brett Hill, said: “Private healthcare and company-funded health benefits are critical in helping people access care quickly and reducing pressure on the NHS. It enables faster diagnosis and treatment, minimising the need for more expensive, complex care and gets people back into the workforce, fighting fit and productive. Increasing IPT rates or introducing other taxes on the private health market would make cover less affordable for both employers and employees, deterring take-up at a time when the public health system critically needs complementary support from the private sector.
“While we are starting to see green shoots of progress on NHS service levels, any punitive levy on the private health market risks stopping this headway in its tracks by pushing more patients onto NHS waiting lists, a move that would clearly be counterproductive for the wider economy. We would urge the Government to recognise the important role of private health provision and resist any move to raise IPT in the upcoming Budget.”
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