The government should scrap Insurance Premium Tax (IPT) on health insurance and introduce tax incentives for workplace health and wellbeing in the upcoming Budget, according to consultancy Broadstone.
The firm argues the current tax system makes it more expensive for employers to provide preventative healthcare. It says that works against the government’s efforts to reduce long-term sickness and economic inactivity.
Broadstone is calling for three measures. The first is the removal of IPT from health insurance products. The second is tax relief, or lower employer National Insurance contributions, for workplace health and wellbeing programmes that meet agreed standards. The third is targeted grants or subsidies to help smaller employers invest in staff health.
Most UK health insurance premiums currently attract IPT at the standard rate of 12%. Employer-funded private medical insurance (PMI) is also generally treated as a taxable benefit for employees, with limited exemptions, and employers normally pay National Insurance on its value.
“The Government has rightly identified long-term sickness and economic inactivity as major challenges for the UK economy. If employers are expected to play a greater role in prevention and early intervention, they need the right incentives to do so,” said Cara Spinks (pictured), head of life and health at Broadstone.
She said targeted support for smaller businesses would help ensure health benefits are not confined to the largest employers.
The proposals tie into the government’s Keep Britain Working agenda. The independent Keep Britain Working Review, led by Sir Charlie Mayfield and published in November 2025, argued that employers should take a leading role in stopping ill health from leading to avoidable job losses.
The government’s latest update on the review, published in September, said around 2.8 million people are economically inactive because of ill health or disability, up around 800,000 since 2019. Separately, the Office for National Statistics estimates 148.8 million working days were lost to sickness or injury in 2025.
Gaps in individual protection add to the pressure. Research published this month by Shepherds Friendly found only 16% of full-time workers hold income protection.
The Treasury would be giving up a growing revenue stream. IPT raised a record £9.04 billion in 2025/26, and the Office for Budget Responsibility expects it to bring in £57.8 billion between 2025/26 and 2030/31, as Insurance Business reported in April. The OBR linked part of that upgrade to rising demand for health-related cover.
HMRC does not publish how much of that total comes from health insurance specifically, and Broadstone’s release does not put a cost on its proposals. The case therefore rests on whether savings from fewer people leaving work, such as lower benefit spending and higher tax receipts, would outweigh the revenue given up.
Employers currently bear the full cost of IPT on group health schemes, because unlike VAT it cannot be reclaimed. Life insurance and long-term care cover are already exempt.
The government’s own September update argued that keeping more people in work does not require significant government investment, and described it as one of the most attainable growth opportunities available.
For brokers advising employers on group risk and health benefits, any cut to IPT or National Insurance on health cover would make PMI, group income protection and wellbeing services cheaper to provide. That would strengthen the case for employers to buy, particularly among smaller firms that see health benefits as unaffordable.
Even without Budget changes, the Keep Britain Working agenda gives brokers a strong argument. Employers face growing pressure to show they are managing sickness absence and supporting staff health, and benefits that speed up diagnosis, treatment and return to work speak directly to that. Brokers should watch the Budget on October 28 for any changes to the tax treatment of employee benefits.
