Figures released by the U.K.’s Office for Budget Responsibility (OBR) as part of the country’s 2021 budget show the increasingly important contribution made by insurance premium tax (IPT) to the country’s finances.
Analysis outlined in a new Best’s Commentary, “Budget Highlights the Growing Contribution of Insurance Premium Tax to UK Finances” shows the extent to which successive U.K. Chancellors of the Exchequer have relied on IPT to bolster the country’s tax receipts.
Over the last decade, the IPT contribution to U.K. finances has almost trebled from GBP 2.3 billion in 2009-10 to GBP 6.5 billion in 2019-20. A like-for-like comparison of domestic U.K. insurance premium shows 2019 gross written premium just 3.2% higher than in 2009.
IPT has shot up the rankings of sources of government revenue to overtake inheritance tax as a contributor to national account taxes and now generates almost as much revenue for the U.K. government as Vehicle Excise Duty (GBP 6.5 billion vs GBP 6.8 billion).
The OBR projections for IPT revenues in the coming years, which the government is likely to use when planning future measures, reflect an expectation that COVID-19 may take a toll on insurance premium income. But the figures suggest a confidence that the U.K.’s insurance industry – and the underlying economy that it supports – should remain resilient if a little bruised.
To access a complimentary copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=306670.
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Senior Financial Analyst
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