Thirty per cent of non-sole trader SME owners said that they have cancelled or actively not pursued health insurance as an option because of Insurance Premium Tax (IPT).
Insurance tax, which has doubled from 6% in 2015 to 12% in 2017, is added to policies, creating higher costs for businesses.
According to a report from Bupa, tax on health insurance has put protecting staff 'out of reach’ for more than 400,000 companies at a time.
This increased cost was reportedly the key factor in three in 10 (30%) businesses cancelling or deciding against health insurance for staff, according to the research.
This is equivalent to 420,000 businesses and 3.63 million employees uncovered because of IPT.
The UK has the second-highest rate of IPT on health insurance in Europe, after Greece.
And when IPT is considered alongside National Insurance and Benefit in Kind taxes the total tax rate facing businesses that want to invest in their employees’ health is between 50% and 72%.
Seventy-six per cent of SME owners surveyed said they view IPT as “hypocritical”, predominantly because the government’s own plans for preventative health strategy state that employers need to take a more proactive approach to looking after their people.
Boris Johnson said that employers protecting their workforce should be ‘rewarded’ with tax breaks.
Most businesses (82%) that do offer health cover said they would consider cancelling these health benefits if IPT is pushed up much further.
Equally, nearly half (44%) of those businesses without health cover would consider getting it if it were cheaper.
Alex Perry, UK CEO of Bupa Insurance, said: “Businesses should not be heavily punished for doing the responsible thing and looking after their employees’ health. They are doing good when they fund health insurance for their people – and also taking huge pressure off the NHS.
“It makes no sense and is unfair to hit them with punitive rates of tax,” he added.
Graeme Trudgill, executive director at the British Insurance Brokers’ Association, said IPT is unfair and a burden on both consumers and businesses alike.
“IPT acts as a huge disincentive in the purchase of adequate insurance protection. SMEs are also faced with an administrative burden in managing the P11Ds (end of year tax form) and the financial burden of employees’ National Insurance payments,” said Trudgill.
Further reading
Why it pays to look after your employees’ health
Health and wellbeing still not a high enough priority
