A recent article in Post Magazine reveals that since Insurance Premium Tax (IPT) was introduced in the UK in 1994 almost GBP30bn has been collected in tax. In the financial year 2010-11 IPT totalling GBP2.4bn was collected by HMRC (link:
On closer scrutiny the increase in IPT revenue from GBP2.3bn in 2009-10 to GBP2.4bn in 2010-11 can in the most part be attributed to the increase in IPT rates in early 2011.
HMRC figures also reveal that over the past 8 financial years the average annual IPT revenue from IPT has been GBP2.3bn. Although this demonstrates a fairly stable and predictable level of tax revenue, which in these uncertain economic times must be good for HM Treasury, a number of interesting conclusions can be drawn from the raw data.
Firstly, in the period 2002-2007 when the economy at its height one might expect IPT revenues to increase as more insurance was purchased. The figures do not support this theory although the prolonged soft market may account for this trend.
Interestingly though, as the bust followed the boom years post 2007, IPT revenue did fall, possibly reflecting the reduction in insurance buying activity. This trend was only halted in 2010-11 when IPT rates were increased.
Secondly, in the year 2010-11 HMRC collected in total GBP447bn from all forms of taxation, with IPT accounting for a mere 0.5% (half of one per cent). Even in 2004-05 when IPT collected was at its peak it only accounted for 0.6% of the total HMRC tax take.
My conclusions; IPT remains a marginal tax dwarfed by most other taxes and duties and even a significant increase in IPT rates would not make a material impact in terms of the overall national tax take. However given that general insurance premiums appear to be on the rise (link:
) I would expect IPT revenues to be increasing in the future rather than remaining static.