IPT receipts expected to hit £10bn by end of the decade after Budget announced

Insurance premium tax (IPT) receipts are expected to hit £10bn by the end of the decade, according to the Office for Budget and Responsibility (OBR).

Today (26 November 2025), chancellor Rachel Reeves delivered the Autumn Budget, which was aimed at cutting the cost of living, reducing NHS waiting lists and driving down borrowing and debt. 

There was no mention of IPT in the Budget, aside from that fact that it will apply at the standard rate to insurance contracts on the Motability Scheme.

IPT is a tax on the price of an insurance product and functions as an indirect tax on consumers and businesses that is collected by insurers and paid to HMRC. The standard rate currently sits at 12% and 20% in certain cases, such as travel insurance.

The OBR’s post-budget report, which was accidentally published before the chancellor delivered her speech, forecast that by the 2030/31 financial year, IPT receipts will reach £10.1bn, up from £8.9bn in the 2024/25 financial year.

Ross Sinclair, founder and chief executive at EIP, said: “Failing to freeze or reduce IPT will have significant knock-on effects for British businesses and consumers, many of whom are already struggling with the cost of living.

”Higher IPT will likely be passed on to customers through higher premiums, which are already at record highs, and this will only widen the gap between those who can and can’t afford protection.”

Jo Wynyard, commercial director at PayingTooMuch, added: ”The chancellor’s decision to keep travel insurance IPT at 20% is another blow to people’s finances. With travel costs already soaring, she ignored a simple way to help families by cutting this punitive tax.

”Keeping IPT at this level risks pushing people to travel uninsured, leaving them vulnerable to serious health and financial consequences abroad. Responsible travellers shouldn’t be penalised for buying cover it’s a necessary safeguard for anyone travelling abroad and shouldn’t be considered a luxury. A fairer IPT policy would encourage people to protect themselves instead of deterring them with unnecessary extra costs.”

Other announcements

Meanwhile, the chancellor also said that by 2029/30, the government will commit over £2bn annually for local authorities to repair, renew and fix potholes on their roads.

In its election manifesto, the Labour Party committed to fixing an extra one million potholes a year. 

”This record level of funding will enable the government to exceed its manifesto commitment to fix an additional one million potholes per year by the end of the Parliament,” the government said.

However, Amy Brettell, managing director at Zurich Municipal, felt that the pothole backlog far exceeds the funding increase promised in the Budget.

She said: “The government’s commitment to tackle the plague of potholes on our roads is good to see, but sadly we know the backlog far exceeds the funding being made available.

”Our own data shows that last winter left more than 38,000 potholes in need of repair, with the total cost to repair local roads now estimated at £16.8bn. In the meantime, potholes are causing damage to vehicles and injuries to cyclists, with Zurich Municipal alone covering annual costs of over £2.5m.”

Meanwhile, it was also announced that the government is introducing Electric Vehicle Excise Duty (eVED), a new mileage charge for electric and plug in hybrid cars, with effect from April 2028.

Drivers will pay for their mileage on a per-mile basis alongside their existing Vehicle Excise Duty. Electric cars will pay half the equivalent fuel duty rate for petrol and diesel cars and plug-in hybrid cars will pay a reduced rate equivalent to half of the electric car rate.

A spokesperson from Admiral said: ”We believe that the decision to introduce a pay per mile tax on electric vehicles will negatively impact the pace of EV uptake.

“Our research shows that 65% of those looking to switch to an electric car do so for the associated cost savings. While we support the chancellor’s extension of the EV grant, ensuring that the conditions for maintaining an EV remain favourable is key to encouraging more people to make the switch.”