Tax revenues swell from higher IPT and rising premiums

The Exchequer’s growing reliance on the insurance sector has been underlined by two new sets of figures.

As revealed online by Insurance Times, a HMRC bulletin shows that the basic rate of insurance premium tax (IPT) generated £730.3m in the three months ending June 2011 – a 27% rise on the £574.3m collected in the second quarter of 2010.

The increase follows chancellor of the Exchequer George Osborne’s decision to raise the basic rate of IPT from 5% to 6%, which came into force in January this year.

Accountants Littlejohn partner Bob Jones said: “The rate going up will increase tax revenues, but also the fact that premiums have been increasing quite dramatically over the past 12 months.”

Last week also saw the publication of a survey of ABI members, according to which insurers paid £2.7bn worth of corporation tax in 2010 – 50% more than in the previous year. This accounts for 6.4% of the Treasury’s total corporation tax take-up and is the third highest figure generated by a single sector.

Once all taxes are taken into account, insurers paid a total of £10.4bn, enough to cover the Home Office’s total £10.2bn budget.