Insurance Premium Tax (IPT) is charged at the standard rate of 12% on UK health insurance premiums. It's built into every quote you see — on the average adult premium of ~£80/month, roughly £8.60/month is tax. Unlike VAT, IPT is not reclaimable by individuals or businesses, and the same treatment applies to personal and company-paid policies.
- ✓IPT is 12% of the premium — around £115/year on the average £80/month policy.
- ✓It's always included in the quoted price; there's no tax to add at checkout.
- ✓IPT can't be reclaimed — by individuals or by VAT-registered businesses.
What IPT is and how it applies to health insurance
Insurance Premium Tax is a UK government tax on general insurance premiums, introduced in 1994. Insurance is exempt from VAT, and IPT exists to tax it instead. There are two rates: a standard rate of 12%, which applies to private medical insurance along with car, home and pet cover, and a higher rate of 20% for certain products like travel insurance sold alongside other goods.
Health insurance sits squarely at the standard rate. The insurer is legally responsible for charging IPT on your premium and paying it to HMRC — you never file anything, and you'll rarely see it itemised. But it's there in every premium, personal or corporate, from every insurer: Bupa, AXA Health, Aviva, Vitality, WPA and The Exeter all price it in identically because the rate is set by law, not by the market.
Already in your quote — how the maths works
Unlike sales taxes in some countries, IPT is never added at the end: the price you're quoted is the price you pay, tax included. To see the tax inside a premium, divide by 1.12:
| Quoted monthly premium | Pre-IPT premium | IPT within it (per year) |
|---|---|---|
| £38 (healthy 30-year-old) | £33.93 | ~£49 |
| £80 (UK adult average) | £71.43 | ~£103 |
| £146 (average couple) | £130.36 | ~£188 |
| £167 (average family of four) | £149.11 | ~£214 |
This also means every premium increase compounds with the tax: when medical inflation pushes the underlying premium up 10%, the IPT on it rises 10% too. And every discount works the same way in reverse — cutting your premium via a higher excess or a leaner hospital list cuts the tax you pay alongside it.
Why you can't reclaim it — IPT vs VAT
The comparison that trips people up — especially business owners — is with VAT. A VAT-registered business reclaims the VAT on most costs; it cannot reclaim IPT, because IPT is a different tax with no input-credit mechanism. What's paid is simply gone, for individuals and companies alike.
| VAT | IPT | |
|---|---|---|
| Rate on health insurance | Not charged (insurance is VAT-exempt) | 12% |
| Reclaimable by VAT-registered business? | Yes, on most inputs | No — never |
| Shown separately on invoices? | Yes | Rarely — usually embedded in the premium |
| Who remits it | The seller | The insurer |
The one silver lining for businesses: while IPT itself isn't reclaimable, the whole premium including IPT is generally an allowable business expense, so corporation tax relief typically applies to the IPT-inclusive amount. The tax reduces no one's bill directly, but it does sit inside a deductible cost.
Compare IPT-inclusive prices
How IPT got to 12% — and where it might go
IPT began at 2.5% in 1994 and has been raised repeatedly since — most sharply between 2015 and 2017, when it stepped from 6% to 9.5%, then 10%, then the current 12% (June 2017). Each rise fed straight into premiums across the market, which is part of why health insurance feels notably more expensive than a decade ago independent of medical inflation.
Where next is speculation, and we'd hedge accordingly. IPT raises billions a year for the Treasury and is administratively easy to increase, so upward pressure never fully goes away; industry bodies including the ABI have long campaigned the other way, arguing that taxing health insurance discourages people from easing pressure on the NHS. Some have proposed exempting medical insurance from IPT entirely. No change is currently scheduled — but check the rate at each Budget, because a move in either direction lands on your renewal automatically.
IPT on business health insurance — same tax, same rate
Company-paid health insurance is treated identically for IPT: the standard 12% rate applies to group scheme premiums, it's included in the per-employee prices you're quoted, and it can't be reclaimed regardless of the company's VAT status. On a typical small business scheme at around £57 per employee per month, roughly £73 per employee per year is IPT.
It sits alongside — not instead of — the other business tax treatments: premiums generally attract corporation tax relief, employer Class 1A National Insurance at 15% applies to the benefit, and employees are taxed on it as a benefit in kind. The full picture is in our VAT and IPT for business cover guide. For budgeting, the practical rule is simple: every quoted figure, personal or corporate, already has the 12% inside it.
Two things IPT is often confused with are worth separating. It isn't the benefit-in-kind tax employees pay on company-funded cover — that's income tax on the premium's value, reported via P11D or payroll, and entirely separate from the 12% inside the premium. And it isn't a levy you can structure around: cash plans, healthcare trusts and self-funding arrangements each have their own tax treatments, but for conventional insured cover the 12% is unavoidable. The practical response isn't avoidance — it's keeping the underlying premium lean, since every pound of premium you don't pay is 12p of tax you don't pay either.
Frequently asked questions
How much is Insurance Premium Tax on health insurance?
12% — the UK standard IPT rate applies to private medical insurance. On the average adult premium of around £80/month, roughly £8.60/month (about £103/year) is tax; on an average family policy at £167/month, over £200/year. It's included in every quoted price rather than added on top.
Is IPT included in my health insurance quote or added on top?
Always included. Insurers must quote IPT-inclusive prices, so the premium you see is the premium you pay, and the insurer remits the tax to HMRC. To see the tax inside any quote, divide the premium by 1.12 — the difference is the IPT.
Can I claim back the IPT on my health insurance?
No. Unlike VAT, IPT has no reclaim mechanism — not for individuals, and not for VAT-registered businesses. Once paid within the premium, it's gone. The only softening is for companies: the full IPT-inclusive premium is generally an allowable expense for corporation tax purposes.
Why is there no VAT on health insurance?
Insurance is exempt from VAT in the UK, and IPT exists precisely to tax it instead. That's why you'll never see a VAT line on a health insurance premium — the 12% IPT embedded in the price is the tax, and unlike VAT it can't be recovered by anyone.
Do businesses pay IPT on group health insurance?
Yes, at the same 12% standard rate, included in per-employee quotes — around £73 per employee per year on a typical £57/month scheme. It's not reclaimable whatever the company's VAT position, though the IPT-inclusive premium generally qualifies for corporation tax relief as a business expense.
Has Insurance Premium Tax gone up over time?
Substantially. IPT started at 2.5% in 1994 and reached the current 12% in June 2017 after rapid rises from 6% between 2015 and 2017 — effectively doubling in under two years. Each increase fed directly into health insurance premiums across the whole market.
Could IPT on health insurance change in future?
Possibly, in either direction — no change is currently scheduled. The Treasury finds IPT easy to raise, while the ABI and insurers have campaigned to cut or exempt medical insurance, arguing it eases NHS pressure. Any Budget change flows into premiums automatically, so it's worth noting the rate each year.
Does IPT apply at 12% or 20% to private medical insurance?
12% — the standard rate. The 20% higher rate applies to specific products such as travel insurance and some insurance sold alongside goods and vehicles, not to private medical insurance. Personal and company health policies alike sit at the standard rate.
Does cutting my premium also cut the IPT I pay?
Yes, proportionally — IPT is 12% of whatever the premium is. Raise your excess, cap outpatient cover or drop to a leaner hospital list and the tax falls with the price: a £300/year premium saving is really about £268 of premium and £32 of tax you no longer pay.