Increase in Insurance Premium Tax will affect employer health benefits

Higher rates of Insurance Premium Tax (IPT) will make providing medical insurance more expensive.

Employers are facing higher healthcare benefits costs after the chancellor announced a rise in Insurance Premium Tax (IPT) in his recent budget, experts are warning. IPT will have an impact on the premiums that employers pay on their private health insurance for staff. It has increased from 5 per cent to 6 per cent at the basic rate and from 17.5 per cent to 20 per cent at the higher rate.

Chris Bailey, senior consultant in the health and benefits business at HR consultants Mercer, said: “This will directly escalate the cost of providing benefits and unlike VAT it is not possible to reclaim. With leading insurance providers generally quoting medical insurance inflation at an average of 7-8 per cent, the additional cost of an increase in IPT is likely to leave employers with a significant hike in premium costs, above the levels they will have budgeted for.”

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