Office for Budget Responsibility Raises Insurance Premium Tax Forecast Using HMRC Data

(UK) — The Office for Budget Responsibility raised its outlook for insurance premium tax (IPT) revenues in its March 2026 Economic and Fiscal Outlook, forecasting a larger haul across the rest of the decade as the government leans on relatively steady consumption-linked taxes.

The OBR said IPT will generate £57.8 billion between financial years 2025/26 and 2030/31, a £0.5 billion increase from its November 2025 projection of £57.3 billion.

That revision matters because IPT sits quietly in the UK’s tax mix but moves with the price of insurance. When premiums rise, the tax take can rise alongside them, even if underlying coverage levels hold steady.

For insurers, employers and households, the forecast lands in the middle of sensitive pricing cycles. Many policyholders face annual renewals, and companies that provide benefits weigh the cost of keeping cover against other pressures.

IPT applies across widely held products, so shifts in pricing and take-up can show up quickly in receipts. When premium inflation runs hot, the tax can amplify the all-in cost paid by customers.

Product mix also matters. Different lines of insurance can grow at different speeds, and the split between personal and commercial cover can affect how price changes feed into receipts.

The OBR’s decision to lift its forecast also offers a signal to the Treasury as it monitors the public finances. The watchdog’s projections form part of the baseline used to score the budget outlook, and changes can ripple through fiscal headroom calculations.

HMRC data, meanwhile, pointed to continued momentum early in 2025/26, giving the forecast revision a firmer near-term footing.

HMRC reported IPT receipts of £7.7 billion in the first 10 months of 2025/26, up £134 million from £7.56 billion in the same period of 2024/25.

That earlier year went on to deliver a record annual total of £8.88 billion, underscoring how strongly the tax can perform when premium values rise across large parts of the market.

Early-year receipts can be influenced by timing, including the cadence of renewals and the way insurers collect and remit tax through the year. Seasonal patterns can matter too, so a strong run-rate does not, by itself, lock in the full-year outcome.

Still, firmer receipts can indicate that premium growth remains embedded, that coverage has held up better than expected, or that the balance of products sold has shifted toward lines with higher premium values. Those same dynamics sit behind the interaction between HMRC data and the OBR’s fiscal monitoring.

In practice, HMRC data helps policymakers track how taxes are performing against plan, while the Office for Budget Responsibility sets out the forward path used in budget planning. Together, the figures act as a check on whether current-year trends match the assumptions baked into the forecast.

The OBR’s year-by-year profile showed a steady upward slope across the forecast window, with receipts rising in steps rather than leaping in a single year.

In its March 2026 outlook, the OBR projected IPT of £8.9 billion in 2025/26, £9.1 billion in 2026/27, £9.3 billion in 2027/28, £9.5 billion in 2028/29, and £9.7 billion in 2029/30.

A gradual rise like that aligns with a tax that tends to track premium levels across a broad base. If underlying premiums climb, even a stable number of policies can generate more IPT.

Pricing trends, claims costs and regulatory costs can all shape premium levels, which then feed into receipts. Competition can pull in the other direction, especially if insurers cut prices to defend market share.

Demand also matters, particularly for covers that households and employers may treat as discretionary. Private medical insurance and health cash plans sit close to that line for some buyers, especially when budgets tighten.

Receipts can also move if behaviour shifts around renewals. If consumers reduce cover levels, switch products, or drop policies, the tax base can soften even without a policy change.

The clearest factor that could shift the OBR’s path would be government decisions on IPT itself, including any change in rates or reliefs. A demand shock that materially changes coverage levels could also push the numbers away from the forecast.

Industry figures said the interaction between rising premiums and IPT is increasingly visible for small firms and individuals, because higher premiums raise the tax paid on top.

Cara Spinks, head of life and health at Broadstone, described smaller firms as absorbing cost pressures in ways that can affect later decisions on cover. “Against a backdrop of sustained pressure on NHS capacity and stubbornly high waiting lists, claims under workplace health insurance continue to rise as employers increasingly look to PMI and health cash plans to support workforce productivity and retention. However, rising premiums risk constraining wider adoption,” she said.

Spinks said this acts as a “shock absorber” for government revenue amid economic inactivity and NHS strains, and she urged targeted IPT relief to boost private health insurance uptake per the Keep Britain Working review.

Her point highlights a central tension for a tax like IPT. When premiums rise, the government can collect more revenue without changing policy, but households and employers may feel the increase directly in renewal pricing.

For employers, workplace health cover sits alongside other staff costs, and pricing can influence whether businesses expand benefits, keep them steady, or scale back at renewal. Small firms can be especially exposed to sharp repricing because they have less room to spread cost increases.

For individuals, higher all-in premiums can change decisions about whether to keep private cover, switch to a different product, or accept higher out-of-pocket risk. As a result, IPT can become more prominent when premiums climb, even though it is a longstanding part of the system.

The OBR forecast also sits inside a wider tax picture in which the government expects a higher overall take across the economy, with households and employers facing multiple pressures at once.

The fiscal plans cited include personal tax rises yielding £15 billion by 2029-30, with the freezing of thresholds adding 780,000 basic-rate, 920,000 higher-rate, and 4,000 additional-rate taxpayers.

Other measures include mileage charges on electric vehicles raising £1.4 billion, adding another strand to the revenue mix as the vehicle fleet changes.

The OBR projected the overall tax take as a share of GDP will reach a post-war high of 38% by 2029-30, placing IPT’s steady rise in a broader story of tightening household budgets and expanding tax bases.

That wider backdrop matters for insurance decisions because insurance competes with other spending. When more income falls into higher tax bands due to threshold freezes, and when other charges rise, some households and employers may reassess costs that feel optional.

The same applies to business spending. Employers weighing benefits such as workplace health insurance do so alongside wage pressures, recruitment needs and other costs, and the all-in premium — including IPT — can affect what feels affordable.

For policymakers, IPT’s appeal is that it can generate reliable receipts when premiums rise, without the political friction of frequent rate changes. For buyers, it is an add-on that becomes more visible when premiums jump.

The latest HMRC data and the OBR’s revised trajectory leave IPT positioned as a growing stream in the medium term, shaped by pricing, coverage decisions and any future moves on reliefs. Spinks’s call for targeted changes tied to the Keep Britain Working review adds to that debate, by framing relief as a lever that could influence uptake as well as receipts.