Record amount of Insurance Premium Tax (IPT) contributed by ABI members

According to The Association of British Insurers’ (ABI) latest?Total Tax Contribution (TTC) Survey, produced by PwC, its members contributed a record ￡18.5 billion to UK public finances over the last financial year.

The ￡18.5 billion tax contribution for their accounting periods, ending in the 12 months up to 31 March 2024, reveals a 9.1% increase since the?previous report. The contribution is more than double the amount recorded when the survey began in 2007, and accounts for 2% of the Government’s total tax receipts.

The total consists of ￡4.1bn of taxes borne, such as VAT, corporation tax, and employment taxes, and ￡14.4bn collected through insurance premium tax (IPT), national insurance contributions, tax deducted at source including pay as you earn (PAYE) on annuities and drawdowns, or employee income tax.

IPT accounted for a significant proportion of general insurers’?taxes, accounting for over 61% of the contribution- the highest level since the survey began in 2007- whilst PAYE on annuities and drawdowns is the most significant tax life insurers collect, making up nearly 74.9% of their total collected.

Commenting on the survey, ABI Head of Taxation, Daniel Gallon said

“Despite significant economic turbulence in recent years, the insurance and long-term savings industry has demonstrated its resilience, continuing to make significant contributions to the UK’s public finances. And with successive record contributions, the market’s value to the economy is proven.”

PwC UK Insurance Tax Leader, Susie Holmes added:?

“ABI members are a major contributor to the UK’s economy and deliver growth and investment up and down the country. Since the Global Financial Crisis, tax contributions from the industry have increased by over ￡10bn, from ￡8.2bn in 2008 to ￡18.5bn today.”

Whilst ABI’s recent statement focuses on the value of the insurance and long-term savings sector, as demonstrated by the contributions it has made to the UK economy via IPT, in February 2024, just seven months ago, the body urged the government to reduce the headline rate to aid people and businesses with rising insurance costs.

In February 2024, ABI Director of General Insurance Policy, Mervyn Skeet said

“It is high time we unmask this tax which penalises people and businesses for being responsible.

“This tax hits the poorest hardest because they typically spend more on insurance, such as home and motor cover, as a proportion of their income.

“There has never been a better time for the government to show its support to the?millions of homeowners and businesses who do the right thing by buying insurance. We should cut IPT now.”

Months before, in November 2023, the body branded IPT a ‘Raid on the Responsible' and urged the then-Chancellor to reduce the rate ahead of the Autumn Statement to help households and businesses to manage rising insurance costs.