London's fintech startups wary of being punished by health tax
London’s fintech scene is paying a high price for its progressive approach to colleague welfare, with ‘healthcare taxation’ more severe in London than anywhere else.
SMEs in the financial services, fintech, IT, marketing and legal sectors, are significantly more likely to provide health cover for their employees. London is also the city with the highest rates of health insurance provision, according to figures provided by Bupa.
Progressive companies are coming up against Insurance Premium Tax (IPT), which has doubled in the last five years. IPT is added to policies so hits businesses’ bottom lines directly.
Alex Perry, CEO of Bupa UK 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.”
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% (depending on basic or higher earner).
This rising cost was the key factor in three in 10 businesses cancelling or deciding against cover for staff over the last five years, but comes at a time when the government’s plans for a ‘preventative’ health strategy states that employers need to take a more proactive approach, with the Prime Minister himself stating that employers protecting their workforce should be ‘rewarded’ with tax breaks.
This has led to 78% of SME owners in London viewing IPT as “hypocritical” and hardening their stance to the tax.
82% of those businesses that do offer health cover say they would consider cancelling these health benefits if IPT is pushed up much further at the next budget.
Conversely, nearly half of those businesses (44%) without health cover would consider it, if it were cheaper.
Perry added: “These aren’t huge corporations that may be equipped to afford such a heavily taxed product, but small, fledgeling businesses in leading-edge industries that are meant to be crucial to the UK’s future economy. We should cut this nonsensical tax and allow businesses to embrace staff wellbeing as they grow.”