Taxman cashes in on private health insurance surge as NHS crumbles

The taxman is on track to net record sums from tax paid on insurance policies this year as crumbling NHS services drive patients to private healthcare.

More than £2bn was paid in insurance premium tax in the third quarter of the 2023- 24 tax year, a 14pc rise compared with the previous three months, according to figures released by HM Revenue and Customs. Receipts from the tax generated £6bn in 2021-22, £7bn in 2022-23 and could now surpass £8bn by the end of the financial year, based on their current trajectory.

As hospital waiting lists hit record highs, it means that patients who do not receive NHS care must pay for both their own medical cover and additional tax to help fund the faltering health service. Cara Spinks, of the actuarial consultancy OAC, said high inflation had pushed up insurance premiums across all sectors, but noted sharp jumps in healthcare. She said: “Increased pressure on the NHS has seen more [people] take out private medical insurance to support continued health and speed up treatment.” She added that the Government should consider scrapping the tax on health insurance plans.

Insurance premium tax is a levy on general insurance premiums, including health, car and home insurance. It is charged at a standard rate of 12pc and a higher rate of 20pc. The latter applies to electrical appliances and vehicle insurance.

Medical insurance costs have spiked between 20pc and 60pc in the past year, as pressure on NHS services pushes more patients towards private treatment. There are a record 7.8m people in England on an NHS waiting list, equivalent to one in eight people. While the rise in health insurance premiums has been acute, costs have risen across the board. The average cost of car insurance has reached £995, up 58pc compared with last year, according to price comparison website confused.com. Meanwhile, the average cost of a home insurance policy that includes high-value items increased by 24pc to £302, according to the website comparethemarket.com.

Tax receipt figures released by HMRC also showed a rise in the amount raised from inheritance tax, hitting £5.7bn in the nine months from April to December 2023 – £400m higher than the same period a year earlier.