Insurance Premium Tax (IPT) receipts are surging toward £10 billion a year — a milestone once thought distant, now within reach by the end of this decade. The HM Revenue and Customs (HMRC) reported that IPT collected £8.883 billion in the 2024-25 financial year, a 9% jump from the year before. That’s not a blip. It’s a trend. And the Autumn Budget 2025London did nothing to slow it down. In fact, it did the opposite: it held the line.
The Numbers Don’t Lie
Let’s break it down. In the first seven months of the 2025-26 financial year alone, HMRC collected £5.52 billion in IPT — up £68 million from the same period last year. July 2025 saw £1.03 billion collected in a single month. That’s more than the entire IPT take in 2015-16, which was £3.29 billion. And it’s not just inflation doing the heavy lifting. Premiums are rising because costs are rising — car repairs, medical treatments, home claims — and IPT, a tax on those premiums, rises with them.
The Office for Budget Responsibility (OBR) estimates IPT will rake in £56.07 billion between 2024-25 and 2029-30. That’s £340 million more than previously forecast. The growth rate? Around 9-10% annually. At that pace, £10 billion isn’t just possible — it’s probable by 2028, maybe sooner.
Why the Government Won’t Touch It
Here’s the twist: insurance companies, brokers, and consumer groups have been begging for a cut in the rate. The current 12% on general insurance — covering cars, homes, and private medical insurance — is the highest it’s ever been. But the government didn’t blink. Broadstone, a UK financial advisory firm, called IPT "the gift that keeps on giving" for Treasury officials. And they’re right.
Between 2011 and 2017, the rate climbed steadily from 6% to 12%. Each hike was a quiet windfall. The 2009 financial crisis left the UK with a gaping hole in public finances. IPT became a reliable, painless source of cash — no votes lost, no direct wage cuts. Unlike income tax or VAT, it’s tucked into your monthly premium. Most people don’t even notice it’s there.
"IPT became a popular lever for cash-strapped Chancellors," Broadstone noted. And now, with inflation still ticking and claims rising, it’s practically printing money. The Insurance Times’ James Cowen put it bluntly: "It’s the tax that keeps on growing, even when the economy stalls."
Who’s Paying the Price?
It’s not just insurers. It’s you. Your car insurance premium went up because your repair costs went up. But a chunk of that increase? That’s IPT. A 12% tax on your home policy. On your pet insurance. On your travel cover. The Actuarial Post found that IPT receipts hit £6.7 billion in the first three quarters of 2024-25 — up 10% year-on-year. That’s £604 million extra, just from premiums climbing.
And then there’s the hidden change. KPMG International flagged that the Budget tweaked the exemption rules for vehicle leasing schemes. No details were released. But in tax terms, that’s a red flag. It means more insurance products are now taxable. More revenue. Less relief for businesses and consumers.
Cover Magazine called the decision a "missed opportunity," especially when the government claims to support workplace health. Private Medical Insurance (PMI) is a key part of employee benefits. But with IPT at 12%, employers are less likely to offer it. Workers lose. The Treasury wins.
The Bigger Picture
This isn’t just about insurance. It’s about how governments fund themselves in an age of rising public costs and shrinking tax bases. Income tax hasn’t kept up with inflation. VAT is already at 20%. Corporation tax is capped. So where do you go? You find taxes that are invisible, automatic, and tied to things people can’t easily avoid — like insurance.
The pandemic briefly stalled the growth in 2020-21. But since then? Steady climb. Every year. Every quarter. Every month. July 2025’s £1.03 billion? That’s not a record — it’s the new normal.
What Comes Next?
The Office for Budget Responsibility doesn’t predict rate hikes. But it doesn’t have to. The system is self-sustaining. As long as premiums rise — and they will, with climate-related claims, medical inflation, and supply chain costs — IPT will rise with them.
Industry groups are already preparing for a 2026 campaign to cap the rate. But with Labour and Conservative both relying on IPT’s predictable revenue, any political will to change it is thin. The Institute for Fiscal Studies estimates that compliance measures from the 2024 and 2025 tax announcements will boost revenues by £7.5 billion over five years. That’s more than the entire IPT take in 2017.
By 2030, £10 billion won’t be a headline. It’ll be a footnote. The real story? The quiet erosion of consumer choice, masked as fiscal responsibility.
Frequently Asked Questions
Why hasn’t the government lowered IPT despite rising insurance costs?
The government relies on IPT as a stable, invisible revenue stream that grows automatically with inflation and premium increases. Lowering the rate would mean giving up nearly £9 billion a year — money that funds public services without direct voter backlash. With other taxes capped or politically sensitive, IPT remains the safest bet.
How does IPT affect everyday consumers?
Every time you pay for car, home, or private medical insurance, 12% of your premium goes directly to the Treasury as IPT. That’s extra cost built into every policy. For a £1,000 car insurance policy, £120 is tax — not profit for the insurer. Many consumers don’t realize this, but it adds up across millions of policies each year.
Is IPT going up again soon?
The rate is currently frozen at 12%, and no official hike is planned. But the government doesn’t need to raise the rate — premiums are rising fast enough to push receipts to £10 billion anyway. Even without a rate change, IPT revenue is on track to hit £10 billion by 2028 due to inflation-driven premium increases.
What’s the impact on private medical insurance (PMI)?
PMI premiums are hit hard by IPT, making employer-provided health coverage more expensive. With a 12% tax on top, many firms are scaling back or dropping PMI entirely. This undermines government health initiatives and shifts more burden onto the NHS, as employees delay care due to unaffordable out-of-pocket costs.
How does IPT compare to other taxes in the UK?
IPT is now the sixth-largest indirect tax in the UK, ahead of Air Passenger Duty and Vehicle Excise Duty. At nearly £9 billion annually, it’s close to the entire income tax take from the lowest 20% of earners. Unlike VAT, it’s not capped at 20%, and unlike fuel duty, it’s not tied to consumption — it’s tied to how much you pay for insurance, which keeps rising.
What’s the historical trend of IPT receipts?
IPT receipts grew from £3.29 billion in 2015-16 to £8.88 billion in 2024-25 — a 170% increase in under a decade. The only dip was in 2020-21 during the pandemic, when claims fell temporarily. Since 2021, growth has been relentless, averaging 9-10% annually. That’s faster than inflation, faster than wage growth, and faster than most other taxes.