Today’s Budget documents reveal that the Office for Budget Responsibility (OBR) has raised its projected tax revenue from Insurance Premium Tax (IPT) by over £370 million between 2023-24 and 2028-29.
This increase is attributed to surging premiums caused by inflationary pressures, resulting in higher-than-expected tax revenues for the Treasury.
OAC head of insurance consulting Cara Spinks says: “The OBR expects revenue from Insurance Premium Tax to rise even higher than expected over the coming years compared to just four months ago, increasing its forecasted revenues by more than £370 million between 2023-24 and 2028-29.
“We are disappointed that the Chancellor failed to take advantage of the Spring Statement to announce a reduction in IPT for health insurance products such as private medical insurance and health cash plans which could have helped make these products more affordable for consumers.
“A strategic reduction in IPT on health insurance could encourage a greater take up of the independent health sector, easing pressure on the NHS and reducing workplace inactivity due to long-term illness, which rose by 200,000 in 2023.”
AJ Bell head of investment analysis Laith Khalaf says: “The OBR forecasts have themselves become the topic of hot debate, as to whether they should be so influential in determining fiscal policy. It’s true that over a quarter of a century of fiscal rules have not landed us with low levels of debt or a trifling tax burden.
“The OBR has only been around since 2010, and works in an advisory capacity, so really the buck has to stop with the successive chancellors who have tinkered with the rules and pushed them to their limits. Some leniency should be applied due to the extreme shocks public finances have had to shoulder in the form of the financial crisis, the pandemic and the energy crisis. The independence of the OBR is valuable in adding credibility to the UK’s fiscal plans, and the mini-Budget gave us a very clear indication of what happens when that is compromised.
“Nonetheless we could do with a wider review of fiscal policy making to consider how it might be improved. The tax system is a patchwork of sticking plasters applied on top of one another over decades. It’s riddled with anomalies, anachronisms and cliff edges which make it a nightmare to navigate.
“The Child Benefit Charge which the chancellor is seeking to address is just one example. Next January could witness a HMRC meltdown as small savers and investors grapple with paying income tax on their savings interest and investment dividends, and capital gains tax on share sales. If you wanted to design a tax system from scratch, it would look nothing like this.”
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