Budget 2025: Insurance Sector Analysis & Comments

IE COMMENT;

It’s hard to see how the 3p per mile, or hybrid tax charges can be accurately calculated and collected, certainly in any cost effective way. Manufacturers, MoT stations, repair garages and others will not be keen to collect this new tax for the government. Mileage in modern cars can be updated’ by software intervention each year too, just Google “mileage correction” online. Asking drivers to report their own miles per year won’t work.

Politicians don’t understand data systems, in-car data recording devices, platforms that share that information, or the server capacity required to store billions of records long term. The notion that the DVLA can somehow calculate miles covered on millions of cars and keep accurate records on who has paid for what, is laughable. You only need to look at the Post Office Horizon scandal to see how badly things will go wrong in the future.

ZURICH

Nikki Lidster, Head of SME at Zurich comments: “Whilst today’s announcement will land in 2029, the prospect of paying national insurance on employer pension contributions for the country’s SMEs will force some businesses to look at how they can improve efficiencies and costs. As the increases announced in the 2024 Budget are just starting to feed through to their balance sheets, one of the key catalysts pushing insolvencies to a 30-year high, so planning ahead will be crucial for businesses across the country. This, coupled with mounting supply chain costs and ongoing cost-of-living increases, continues to weigh heavily on consumer confidence. This is a challenging time for small business owners across the UK.
“We welcome the changes to the enterprise incentives schemes to encourage more businesses to build in the UK, but the UK’s uncertain economic landscape means SMEs may struggle to absorb another wave of cost pressures without drastic measures, including scaled-back investments or staffing cuts. Weaker consumer confidence and muted economic growth will only add to their woes. These increases will continue to deepen the strain, forcing firms to juggle immediate pressures against the need for long-term resilience. Strategic planning and careful cash-flow management have never been more critical for Britain’s small business backbone.”
EIP
Ross Sinclair, Founder and CEO at EIP, comments:

“It’s disappointing to see the government not taking a harder line on tackling cyberattacks, fraud and mobile phone theft, which should be top of the agenda. With more investment and resource allocation to tackling these issues, the government could have improved insurers loss-rations and kept premiums and costs stable for both businesses and consumers.”

WESTFIELD HEALTH

Dave Capper, CEO of Westfield Health

On Insurance Premium Tax (IPT) 

“Keeping Insurance Premium Tax (IPT) for health at 12% is a missed opportunity at the worst possible time. With long-term sickness at record levels, taxing people and businesses who are trying to stay healthy makes little economic sense. Health insurance isn’t a luxury good; it’s a core part of national resilience.

“Removing IPT would have made workplace health support – such as health cash plans and private health insurance – more affordable, helping to expand healthcare capacity across the system and relieve pressure on an overstretched NHS. It would have opened the door to earlier intervention and kept more people in work rather than stuck on long waiting lists.

“Instead, the Government has chosen to maintain a barrier to prevention at the very moment it says it wants to ‘get Britain working.’”

ALVAREZ AND MARSAL

Alexander Marcham, Managing Director at Alvarez & Marsal Tax, said: “Current Council Tax bandings are still based on 1991 values, which often bear little resemblance to today’s market. Delivering this reform as planned would effectively require a full revaluation of every property in the country to 2026 levels – a huge administrative task that likely explains why implementation has been pushed to 2028.

Even the OBR acknowledges the risk of widespread behavioural responses and a flood of appeals. One local council officer recently told me that a surge in appeals at this scale could ‘break the national valuation system’ – and that risk cannot be taken lightly. For a government seeking growth, a policy that could overwhelm the valuation system and further freeze a fragile housing market looks like a very high price for very limited gain.”

LCP DELTA

John Murray, Head of Electric Vehicles at LCP Delta comments on the Government’s Pay-per-Mile Tax: “The Government’s decision to introduce a £0.03-per-mile tax for EV drivers poses a serious risk to the industry. It makes the switch to electric vehicles less attractive and risks hardening public scepticism at a critical moment for mass adoption.

“LCP Delta’s forecast shows that with more than 3.2 million fully electric cars on the road by April 2028, each driving an average of 8,500 miles, the Pay-Per-Mile tax would raise around £0.82 billion a year. That is around half the revenue that would have been generated if those same vehicles were traditional petrol or diesel cars paying fuel duty. The message is clear: while the tax generates some income, it falls far short of replacing collapsing fuel-duty revenues from declining ICE sales.

“However, the bigger concern is what this does to public behaviour. By imposing a new running cost on EVs, this policy risks stalling Battery EV adoption by making ICE or Plug-in Hybrid EV ownership look more financially attractive. That cuts directly against the UK’s decarbonisation strategy.

“If the Government is serious about maintaining EV growth while addressing the fiscal shortfall, a smarter, more balanced approach would have been to focus on fuel duty for ICE vehicles. The temporary 5p cut introduced in 2022 is already scheduled to end in April 2027, returning to its previous level. Building on that – for example by implementing a modest inflationary aligned uplift on petrol and diesel levies which have been frozen for over a decade would have raised significantly more revenue and maintained a clear incentive to switch to electric.

“Instead, today’s announcement creates a contradictory policy landscape: the Government is offering incentives with one hand and undermining them with the other. At the very moment when clarity and commitment are needed to accelerate the transition, EV drivers are being sent mixed signals.”

INVENTORY BASE

Sián Hemming-Metcalfe, Operations Director at Inventory Base, commented landlord/property income tax;

“Landlords may have avoided a National Insurance surcharge, but the two percent increase in property income tax will still land heavily with those operating within the rental sector. Smaller individual landlords are already working through one of the biggest operational shifts the sector has seen in years as the Renter’s Rights Act beds in. Many are investing in upgraded processes, property standards and compliance systems, and this extra tax cost arrives precisely when their outgoings are rising rather than falling.

Although incorporated landlords may absorb the change more easily, the amateur and accidental landlords who rely on rental income as part of their household finances are far more exposed. They tend to act conservatively when the rules keep shifting, and they are often the first to reduce investment or withdraw from the sector entirely.

In a rental market that is already struggling with a chronic lack of stock, anything that accelerates that trend will be felt by tenants long before it is felt by policymakers. Stability, not additional pressure, is what the sector needs now.”

ATRADIUS

James Burgess, Head of Commercial and Insolvency expert at Atradius UK, says:
“Personal tax changes, including freezing all personal income tax thresholds until 2030-31, will potentially curb spending and weaken demand,  further pressuring business revenues at a time when businesses are already stretched by weak demand and high costs.
Companies should act quickly to protect their working capital – tightening credit control, reviewing payment terms, and leverage trade credit insurance to safeguard against defaults in an uncertain trading landscape.
Our latest Resilience Gap Report shows how far emergency cash reserves have already been eroded by rising risks, underlining that higher tax burdens may hit firms at a moment when their financial buffers are at their weakest.”

WEALTH CLUB
Nicholas Hyett, Investment Manager at Wealth Club said:

“There’s a certain logic to ISA reform. Anyone who hits the maximum £20,000 cash ISA allowance year-after-year should really be thinking about investing some of that in the stock market.

However, the reality is that this policy needn’t affect your savings decisions at all. Money market and other short dated fixed income funds available in a stocks & shares ISA mean investors can effectively hold cash within a stocks & shares wrapper.

On the plus side this means investors really don’t need to worry too much about this ISA reform – though banks may find the fall in cheap deposits more problematic. It’s less good news for the Chancellor though. The reform was designed to encourage investment in UK listed companies, but she may find that she has positioned herself against the UK’s army of committed savers and not achieved much at all.”

FAIR FUEL UK

Howard Cox, Founder of FairFuelUK.com said: “Our months of lobbying in the lead up to the Winter Budget seems to have paid off. A big thanks to MP for Broxbourne, Lewis Cocking for leading our 15th year of this widely respected campaign inside Parliament too, He has made a real difference. Drivers, especially those that fill up with diesel remain the highest taxed in the world, but it would be churlish not to thank the Chancellor for listening in her second Budget to her own MPs, who have received thousands of calls from their FairFuelUK supporting constituents to keep this regressive tax frozen.

15 years I have led the economic case for keeping fuel duty as low as possible, and it remains the case that cutting this needlessly too high tax on an essential resource, it should still be reduced. This action more than any other levy will deliver increased consumer spending, new jobs, lower inflation and faster GDP growth. It’s time the Labour party lose the anti-driver label, and at last see private road user transport as a stimulus to delivering economic growth not the ill-informed belief trumpeted by Ed Miiliband they are responsible for climate change.

Rachel Reeves’s 3p Pay per mile on EVs is I fear the thin end of the wedge to make all vehicles, whatever their type of fuel, pay tax as they drive. Whilst Fuel Duty and VAT continues to deliver billions to the exchequer, both types of taxation cannot work alongside each other. It’s time Government listens to and consults drivers as to developing a long term road user tax plan that’s fair to UK’s 37m drivers and the economy. FairFuelUK is here to contribute to that plan”

AURORA CAPITAL

Following the Chancellor’s Autumn Statement announcement, George Holmes, Managing Director of business finance specialists Aurora Capital, looks at what it means for small businesses:

“Small businesses will be weighing up a mixed bag in this Budget. A freeze on the small business rates multiplier, another year of frozen fuel duty, and extended regional growth funding are all welcome moves.

The £4bn expansion of the British Business Bank is also a positive step, but firms will want to see how quickly that support actually reaches them.

However, rising wage bills from the increased minimum wage and higher taxes on dividends and business income will be of major concern to many.

With income tax thresholds frozen until 2030 and no new nationwide reliefs, many small firms will feel they’re absorbing more cost without much new support in return.

This isn’t a Budget built around small business growth. It gives some short-term stability, but the long-term cost pressures are mounting.

If the government wants small firms to lead the recovery, it needs to be braver and more targeted with its backing.”