Chancellor Rachel Reeves (pictured) did not increase the rate of Insurance Premium Tax (IPT) as part of her Budget 2025 announcement and the health and protection insurance industries were largely unaffected by IPT changes.
However, Motability schemes are being brought into the scope of IPT from summer 2026 with an expected tax raise of £1.065bn over the next five financial years, reaching a maximum of £305m in 2030-31.
Despite this increase, the Office for Budget Responsibility (OBR) now expects IPT income will be around £400m lower over the five years from 2025-26 to 2029-30 than it predicted in the spring.
Tax receipts from IPT have been steadily rising since the pandemic with the health and protection market calling for rates to be cut or products excluded to encourage people not to use NHS services.
However, their calls continue to make no headway with government.
On the Motability scheme inclusion, HM Treasury said from July 2026 Insurance Premium Tax will be applied at the standard rate of 12% for insurance related to vehicles leased through the scheme.
However, tax changes will not apply to vehicles designed for, or substantially and permanently adapted for, wheelchair or stretcher users.