If you've ever compared the premium your insurer quoted with what actually appears on your statement, you may have noticed a gap. That gap is almost always Insurance Premium Tax, or IPT — a tax on general insurance premiums that most people have never heard of, despite paying it every time they renew a policy.
What is IPT?
IPT is a UK tax on insurance premiums, collected by insurers and paid to HMRC. It applies to most classes of general insurance, including motor, home, pet and private medical insurance. The standard rate currently applied to most policies, including private health insurance, is 12% — added on top of the underlying cost of cover, not included within the headline premium you're first quoted.
Note: A higher 20% rate applies to a narrower set of products, such as standalone travel insurance and some mechanical breakdown cover sold through vehicle dealers — health insurance falls under the standard 12% rate.
What this means for your actual cost
In practice, if an insurer's underlying premium for your cover is £100 a month, IPT at 12% adds £12, taking your actual payment to £112. This is baked into the price you're quoted during comparison — you won't see it added separately at checkout — but it's worth understanding because it explains part of why premiums can rise even when an insurer's own costs haven't changed: any increase to the IPT rate itself flows straight through to what you pay, on top of normal premium inflation.
Why it matters when comparing policies
IPT applies at the same rate across the health insurance market, so it doesn't change which insurer is cheaper relative to another — but it does mean that headline premium comparisons before tax can understate your real cost. When you compare quotes, make sure you're comparing the final, tax-inclusive price across every insurer, not a pre-tax base rate from one provider against a tax-inclusive figure from another.
Get a real, tax-inclusive quote — Compare final health insurance prices from leading UK insurers — no hidden extras, no surprises.
Frequently asked questions
Is Insurance Premium Tax the same as VAT?
No. IPT is a separate tax that applies specifically to general insurance premiums, including health insurance. Most insurance is exempt from VAT, but IPT applies instead at its own rate.
Do I pay IPT directly, or does the insurer handle it?
Insurers build IPT into the price you're quoted and pay it to HMRC on your behalf — you don't need to do anything separately. It simply means the premium you pay is higher than the 'pure' cost of the cover itself.
Has the IPT rate on health insurance changed recently?
The standard rate has been adjusted by the government at various points over the past decade. Always check the current rate, since it's set by HM Treasury and can change at a Budget or fiscal event — your insurer's quote will reflect whatever rate applies at the time.
Related reading
- Why Are Private Health Insurance Premiums Rising in 2026?
- Employer Health Insurance vs Buying Your Own: What's the Difference?