Proposed VAT on Private Health Insurance

[dcbwhaley]

Proposed by N Kinnock and not something I. for personal reasons ,would support.
The comparison he makes with VAT on private school feeas is spurious since there is already a 12% tax on insurance premiums whereas there is no such tax on school fees

 

[Bletchleyite]

The comparison he makes with VAT on private school feeas is spurious since there is already a 12% tax on insurance premiums whereas there is no such tax on school fees

Yes, correct. It's not a vice, so double taxation of the kind you see on alcohol isn't appropriate.

By all means increase IPT on medical insurance to 20% from 12% though, I wouldn't oppose that per se. Alternatively remove IPT and bring insurance premiums into VAT.

 

[Howardh]

Is there a tax (VAT) on private health costs - eg if someone needed their cataracts doing privately?

 

[Harpers Tate]

Here's an alternative POV: every person who self-funds (whether by insurance or privately) a healthcare requirement is thereby saving the NHS the cost of providing such consultation/diagnosis/imaging/treatment. Thus there is, right there, an immediate benefit to the public purse.

Tax it (more) and a proportion will cease using it. As indeed they are doing with private schools. Which has an immediate disbenefit to the public purse. The question becomes - will such taxation income more than or less than offset the increase in state costs?

 

[dcbwhaley]

Is there a tax (VAT) on private health costs - eg if someone needed their cataracts doing privately?

No. Medical bills are exempt from VAT.
Private prescriptions are 0% VAT

 

[JonathanH]

All this effort to find extra things to tax, rather than doing the simple thing and increasing income tax on higher earners. There must come a point at which Increasing income tax becomes acceptable even if it breaks manifesto promises.

Tinkering with extra tax on private health insurance does seem like scraping the barrel a little.

From a philosophical perspective, are taxes on consumption or income better for the economic future of the country?

 

[Howardh]

No. Medical bills are exempt from VAT.
Private prescriptions are 0% VAT

Thanks!

 

[brad465]

All this effort to find extra things to tax, rather than doing the simple thing and increasing income tax on higher earners. There must come a point at which Increasing income tax becomes acceptable even if it breaks manifesto promises.

Tinkering with extra tax on private health insurance does seem like scraping the barrel a little.

From a philosophical perspective, are taxes on consumption or income better for the economic future of the country?

What Labour should have done was reverse the 2x NI tax cuts Hunt had initiated in the Tories' final year, and say to the electorate "these cuts are unaffordable, but we won't raise taxes on working people beyond this". Given they only came into effect in January and April 2024, workers had barely got used to it. If the reason they didn't pledge to do this was because it would cost too many votes, then it highlights how, for all our disgust at politicians lying, too many voters can't handle the truth either.

I would be surprised if this VAT proposal ever happens in any case: Kinnock has no real power/influence, and there are too many problems with such a tax, including the fact you'd need exemptions for Dentists and some other private services (including the govt using private capacity for NHS patients to reduce the backlog), or else face a major backlash.

 

[JonathanH]

What Labour should have done was reverse the 2x NI tax cuts Hunt had initiated in the Tories' final year, and say to the electorate "these cuts are unaffordable, but we won't raise taxes on working people beyond this". Given they only came into effect in January and April 2024, workers had barely got used to it.

Well yes, although National Insurance is more regressive than income tax because the lower earnings limit is lower than the personal tax threshold, and the upper earnings limit means it isn't charged on higher levels of income.

Removing the upper earnings limit could be transformative in making National Insurance a more progressive tax, although perhaps the £100,000 to £125,000 taper point would need to be applied over a wider range to avoid 70% tax on this band of income.

If the reason they didn't pledge to do this was because it would cost too many votes, then it highlights how, for all our disgust at politicians lying, too many voters can't handle the truth either.

Yes, in a way they were too cautious in their tax pledges. Even now, there is a risk that tax changes push people towards the unfunded promises of Reform.

I would be surprised if this VAT proposal ever happens in any case: Kinnock has no real power/influence, and there are too many problems with such a tax, including the fact you'd need exemptions for Dentists and some other private services (including the govt using private capacity for NHS patients to reduce the backlog), or else face a major backlash.

These things are a calculated gamble. Do taxes which primarily affect the more affluent actually cost Labour votes? Is there actually a backlash if a change primarily increases the burden on those who can afford to pay more tax?

 

[sor]

My main problem with the idea of taxing healthcare/dental is that it is a necessity for many. This isn't some tory-era thing, as some of us have been with a private dentist since Blair was in office because it was hard to find an NHS dentist back then as well. It isn't all that expensive either. The private dentist in the deprived area that I grew up in has never been short of business and has relatively recently expanded.

So I think there would be a backlash for that reason - and the fact that a lot more people have private healthcare or dental insurance than send their kids to fee paying schools

 

[cactustwirly]

My private health insurance is a company benefit, I already get taxed via BIK. My personal allowance is reduced by the value of the insurance.

Such a ridiculous policy, if I use it I take pressure of the NHS. It has stuff like GP phone consultations etc

 

[simonw]

Proposed by N Kinnock and not something I. for personal reasons ,would support.
The comparison he makes with VAT on private school feeas is spurious since there is already a 12% tax on insurance premiums whereas there is no such tax on school fees

As you didn't link to anything I can't check but I am assuming it's not on insurance where insurance premium tax is already paid but on private medical bills.

 

[Bletchleyite]

From a philosophical perspective, are taxes on consumption or income better for the economic future of the country?

Taxes on consumption are harder to avoid and evade. There's some tinkering around the edges e.g. people evading VAT by paying small tradespeople cash in hand, but the majority of products are VATed and the VAT is paid.

Overall I prefer tax on income and assets (the latter is important too) but it is much easier for well-off people and businesses not to pay. VAT is in practice really very hard to avoid or evade.

 

[dcbwhaley]

As you didn't link to anything I can't check but I am assuming it's not on insurance where insurance premium tax is already paid but on private medical bills.

Former Labour leader calls for private healthcare tax to fund NHS

The call came with polling which found 55% supported a windfall tax on private healthcare companies. Kinnock said: ‘Introducing VAT on private health provision...

www.healthcare-management.uk

As you didn't link to anything I can't check but I am assuming it's not on insurance where insurance premium tax is already paid but on private medical bills.

It is not clear whether the tax would be on the premium payer or on the provider (who would inevitably raise premiums to cover it)
Nor is is clear in the first instance whether it would be in addition to or in place of IPT.
Then nothing is ever clear in these proposals from Labour

== Doublepost prevention - post automatically merged: 6 Aug 2025 ==

Taxes on consumption are harder to avoid and evade. There's some tinkering around the edges e.g. people evading VAT by paying small tradespeople cash in hand, but the majority of products are VATed and the VAT is paid.

Overall I prefer tax on income and assets (the latter is important too) but it is much easier for well-off people and businesses not to pay. VAT is in practice really very hard to avoid or evade.

But, given PAYE, it is virtually impossible for wage earners to avoid income tax. Which is a cause of much resentment
Taxes on indivisible assets such as land and property are really taxes on the income which is needed to pay them

 

[DarloRich]

My main problem with the idea of taxing healthcare/dental is that it is a necessity for many. This isn't some tory-era thing, as some of us have been with a private dentist since Blair was in office because it was hard to find an NHS dentist back then as well. It isn't all that expensive either. The private dentist in the deprived area that I grew up in has never been short of business and has relatively recently expanded.

So I think there would be a backlash for that reason - and the fact that a lot more people have private healthcare or dental insurance than send their kids to fee paying schools

most people simply don't go to the dentist. I didn't go for 20+ years until I could get an NHS one recently.

 

[RT4038]

My private health insurance is a company benefit, I already get taxed via BIK. My personal allowance is reduced by the value of the insurance.

Such a ridiculous policy, if I use it I take pressure of the NHS. It has stuff like GP phone consultations etc

People sending their children to private schools take the pressure of the State school system, but that argument got short shrift, so don't expect taking pressure off the NHS to get much traction either.

 

[swt_passenger]

All this effort to find extra things to tax, rather than doing the simple thing and increasing income tax on higher earners. There must come a point at which Increasing income tax becomes acceptable even if it breaks manifesto promises.

They do that by default anyway, all the time the personal allowance remains the same, and the higher rate threshold stays the same, then the number of ‘higher earners’ just gradually increases anyway. Assuming higher rate = higher earner?

They also just arbitrarily defined a level of income of £35000 as ‘adequate’ and enough to lose the winter fuel payment. Let’s see if that figure ever gets an annual increase…

Also, as the ’new full state pension‘ with its triple lock continues to increase towards the value of the personal allowance then people with only the state pension will suddenly find it becomes taxable. (It’s already part of your taxable income of course.)

 

[dcbwhaley]

They do that by default anyway, all the time the personal allowance remains the same, and the higher rate threshold stays the same, then the number of ‘higher earners’ just gradually increases anyway. Assuming higher rate = higher earner?

That is the problem with the wealth tax. If twenty years ago they had introduce a wealth tax at £500,000 there would have been great support for taxing the rich bast**ds.
Today anyone with a decent house would be paying it.

 

[Bletchleyite]

That is the problem with the wealth tax. If twenty years ago they had introduce a wealth tax at £500,000 there would have been great support for taxing the rich bast**ds.
Today anyone with a decent house would be paying it.

That's essentially what happened with stamp duty. It came about as a form of mansion tax, but house price inflation and not upping the tax bands ("fiscal drag") caused almost all houses to be brought into its scope.

 

[RT4038]

Such is the problem - increased taxation is only any good if it is other people having to pay it.

 

[Harpo]

Taxes on consumption are harder to avoid and evade.

It’s much easier for small businesses to pay the consumption tax and avoid income and corporation tax. New car, pay through ‘the company’; new phones, laptops etc., paid for by ‘the company’; too much income tax, pay a family teenager a ‘wage’ and use their tax-free allowance, etc..

 

[35B]

That is the problem with the wealth tax. If twenty years ago they had introduce a wealth tax at £500,000 there would have been great support for taxing the rich bast**ds.
Today anyone with a decent house would be paying it.

I suggest reading "Wealth taxes: high risk, unworkable and anti-growth" from Tax Policy Associates. To quote the intro:

A UK wealth tax is often promoted as an easy revenue-raiser that would only affect the very rich. Our analysis finds the opposite: the revenue is highly uncertain, and would arrive only after years of complex implementation. Most importantly, the tax would lower long‑run growth and employment, thanks to a decline in foreign and domestic investment. It would make UK businesses more fragile and less competitive, and create strong incentives for capital reallocation and migration. There are better solutions to the many problems with our tax system.

This report summarises the UK wealth tax proposals, analyses the claimed revenue yield, and looks at the potential downsides and risks, and the policy alternatives. We compare the new proposed wealth tax with the older wealth taxes that have largely failed and been repealed. Finally, we suggest better and less risky ways to tax wealth in the UK.

 

[Cdd89]

Yes, correct. It's not a vice, so double taxation of the kind you see on alcohol isn't appropriate.

By all means increase IPT on medical insurance to 20% from 12% though, I wouldn't oppose that per se. Alternatively remove IPT and bring insurance premiums into VAT.

IPT is set at 12% to be approximately equivalent to 20% VAT without trying to tax reserves. It's a fudge a bit like how CGT is set lower than income tax to try and account for inflationary gains.

Arguing for IPT to be 20% is effectively saying you want insurnace products to be taxed beyond VAT levels - which might be what you want of course but I'm not sure that's clear from your post.

 

[dcbwhaley]

IPT is set at 12% to be approximately equivalent to 20% VAT without trying to tax reserves.

Could you explain that to a bear of little brain please

Arguing for IPT to be 20% is effectively saying you want insurnace products to be taxed beyond VAT levels - which might be what you want of course but I'm not sure that's clear from your post.

I have always seen IPT as a tax on prudence,

 

[brad465]

I suggest reading "Wealth taxes: high risk, unworkable and anti-growth" from Tax Policy Associates. To quote the intro:

While this will require a lot of work to get up and running, the wealth tax that should be pursued is land tax. Land can't be offshored (except on geological timescale), so can't be avoided easily, while different rates can be charged based on land use.

For example, someone's first home, active farmland and other land of high value use can be given a low tax rate. On the other hand, someone's second/holiday home, country estates/mansions, grouse moors and other uses that are not essential, and in many cases a burden on society, can be taxed at higher rates. If someone doesn't like the tax, they can sell the land and another buyer will take it and pay the tax, or convert the land into something more useful that's taxed lower. If this leads to difficulty selling, the land value drops until it sells, which makes it all more affordable and reduces already high housing/business costs for many.

This will either be a high revenue raiser, and/or will lower the costs of assets that are a burden on other more useful economic activity, making existing tax burdens more manageable and lower welfare spending.

 

[RT4038]

While this will require a lot of work to get up and running, the wealth tax that should be pursued is land tax. Land can't be offshored (except on geological timescale), so can't be avoided easily, while different rates can be charged based on land use.

For example, someone's first home, active farmland and other land of high value use can be given a low tax rate. On the other hand, someone's second/holiday home, country estates/mansions, grouse moors and other uses that are not essential, and in many cases a burden on society, can be taxed at higher rates. If someone doesn't like the tax, they can sell the land and another buyer will take it and pay the tax, or convert the land into something more useful that's taxed lower. If this leads to difficulty selling, the land value drops until it sells, which makes it all more affordable and reduces already high housing/business costs for many.

This will either be a high revenue raiser, and/or will lower the costs of assets that are a burden on other more useful economic activity, making existing tax burdens more manageable and lower welfare spending.

So you are quite happy for someone elses wealth to be not only taxed but also reduce in value, but presumably not yours?

 

[Bletchleyite]

So you are quite happy for someone elses wealth to be not only taxed but also reduce in value, but presumably not yours?

I'm happy with the idea of taxing land use to make it more efficient/push to more desirable uses. In particular I'd be more than happy to tax the Russian oligarchs who sit on unoccupied flats in central London right out of the country.

We have a housing shortage; the tax system is one way to manipulate land use to ensure it is the most efficient for the country as a whole and not individual rich people, who should invest in positive things like construction and other business to grow the economy, not in land that appreciates in value simply because of scarcity.

 

[brad465]

So you are quite happy for someone elses wealth to be not only taxed but also reduce in value, but presumably not yours?

If, as Bletchleyite sums up quite nicely, the wealth is doing nothing but sit on unproductive land, then it should be taxed heavily, and if it's value reduces as a result of the existence of such a tax, so be it. If however the land is being used in a good way, such as farming, certain businesses and providing essential homes, the tax rate would be lower, but we'd still pay something. You may also have noticed productivity has been stagnant since the Great Recession, despite GDP appearing to increase since 2010, which implies wealth is being hoarded and/or just inflating through unproductive means.

 

[Sorcerer]

I'm happy with the idea of taxing land use to make it more efficient/push to more desirable uses. In particular I'd be more than happy to tax the Russian oligarchs who sit on unoccupied flats in central London right out of the country.

There is such an overwhelming case for land taxation that I'm shocked prominent left-wing voices haven't tried to make the case for it. Unlike property tax it actually encourages development and also ensures efficient land usage as well as being a way to help solve the housing shortages, and there is almost no way to get around it; Amazon for example can probably find ways to reduce corporate taxation, but they cannot dispute how much land their warehouses might occupy. I'd rather see that along with a few more Pigouvian taxes before any new VAT on private health insurance, especially when the NHS is already struggling as it is.

 

[JonathanH]

There is such an overwhelming case for land taxation that I'm shocked prominent left-wing voices haven't tried to make the case for it.

There was certainly a scare story about a 'garden tax' just before the 2019 valuation.

One problem with taxing people more if they have a bigger garden is that if it encourages people to sell off their garden land for development, it results in less space for nature in urban areas, so it isn't all good.

Amazon for example can probably find ways to reduce corporate taxation, but they cannot dispute how much land their warehouses might occupy.

I note the building of enormous warehouses and never quite understand why they aren't permitted to be built taller off the ground to cover a smaller footprint.