Insurance Premium Tax is charged at 12% on UK health insurance premiums and raises roughly £8 billion a year for the Treasury across all insurance lines. It started at 2.5% in 1994 and has never been cut. On the average ~£80/month policy, about £8.60 a month is already tax — and a rise to 15% would add around £26 a year.
- ✓IPT raises roughly £8 billion a year and has risen from 2.5% (1994) to 12% (2017).
- ✓About £8.60 of the average £80/month health premium is already tax.
- ✓A rise to 15% would add roughly £26/year to an average adult policy.
The tax most policyholders have never noticed
Insurance Premium Tax is a tax on general insurance premiums — health, car, home, pet — collected by insurers and passed to HMRC. Because it's always built into the quoted price, most people have no idea they pay it. But across all insurance lines it raises roughly £8 billion a year for the Treasury, which is precisely why it attracts attention whenever a Chancellor is looking for revenue that doesn't show up on a payslip.
Health insurance sits at the standard rate of 12%. On the UK average adult premium of around £80/month, roughly £8.60 a month — about £115 a year — is tax rather than cover. For a family paying ~£167/month, the tax inside the premium is around £215 a year.
How 2.5% became 12%
IPT has only ever moved in one direction. The standard rate has risen six times since its introduction, and the steepest climb came in under two years:
| When | Standard rate | Change |
|---|---|---|
| October 1994 | 2.5% | Introduced |
| 1997–1999 | 4%, then 5% | Two early rises |
| January 2011 | 6% | +1 point |
| November 2015 | 9.5% | +3.5 points |
| October 2016 | 10% | +0.5 points |
| June 2017 | 12% | Current rate |
The rate has now been stable for nine years — the longest pause in IPT's history. That stability is why each Budget and Autumn Statement brings a fresh round of speculation: a tax that doubled in the two years to 2017 and has sat still since looks, to Treasury-watchers, like headroom. Every previous rise passed through to premiums within a renewal cycle, because insurers collect the tax rather than absorb it — there is no version of an IPT rise that policyholders don't ultimately pay.
Will it rise? What we actually know
To be clear: no increase has been announced, and we're not predicting one. But the arguments recur every fiscal cycle. IPT is cheap to collect, hard to avoid and politically quiet — nobody marches over a tax they've never consciously paid. The insurance industry, through the ABI, argues the opposite case: that IPT is a tax on prudence, falling on people who protect themselves, and that the UK's 12% is already high by historical standards.
Some Treasury-watchers have also noted that the higher IPT rate — 20%, currently applied to travel insurance and some add-on products — offers a ready-made precedent for where the standard rate could eventually go. Again: speculation, not policy. What's worth knowing is what any rise would cost you, because it would feed into premiums at the very next renewal.
See what cover costs — tax included
What a rise would cost policyholders
Because IPT is a percentage, a rise costs more the higher your premium — older policyholders and families would feel it most. Here's the arithmetic on today's typical premiums (which already include 12% IPT):
| Current premium (incl. 12% IPT) | At 15% | At 20% |
|---|---|---|
| £38/month (healthy 30-year-old) | +£12/year | +£33/year |
| £80/month (UK adult average) | +£26/year | +£69/year |
| £146/month (typical couple) | +£47/year | +£125/year |
| £167/month (family of four) | +£54/year | +£143/year |
For the full picture of how the tax works — including why businesses can't reclaim it the way they reclaim VAT — see our Insurance Premium Tax guide. And if a rise ever is announced, the sensible response isn't panic: it's making sure the rest of your premium is working hard, which is what trimming your cover options is for.
Frequently asked questions
Is IPT on health insurance going up in the next Budget?
No rise has been announced. IPT has been at 12% since June 2017 — the longest stable stretch in its history — but speculation recurs at every fiscal event because the tax raises roughly £8 billion a year and is cheap to collect. Any change would be announced at a Budget and would feed into premiums at renewal.
How much of my health insurance premium is IPT?
Divide your premium by 1.12 to find the pre-tax amount — the difference is IPT. On the average adult premium of ~£80/month, roughly £8.60/month (about £115/year) is tax. On a family premium of ~£167/month, it's around £215 a year.
What would an IPT rise to 15% cost the average policyholder?
Around £26 a year on the average £80/month adult premium, and roughly £54 a year on a typical £167/month family policy. Because IPT is a percentage of the premium, older policyholders and families with higher premiums would pay the most.
Why is IPT called a stealth tax on premiums?
Because it's never itemised at checkout — the quoted premium already includes it, insurers remit it to HMRC, and you never file anything. Most policyholders don't know that roughly a ninth of what they pay for health insurance is tax rather than cover.