Health secretary Wes Streeting has confirmed there will be no VAT on private healthcare in the upcoming Budget, stating: “It’s not happening.”
His intervention followed reports that the chancellor was considering imposing VAT on private medical services, despite Labour’s broader pledge not to raise taxes.
Critics of the current exemption have argued that scrapping it could raise billions in additional revenue.
The issue gained prominence when former Labour leader Lord Kinnock called on Rachel Reeves to introduce VAT on private healthcare.
He suggested the measure could provide funding for NHS reform and help address the system’s mounting pressures.
Kinnock argued: “Introducing VAT on private health provision could provide vital funding for the NHS and social care. After 14 years of underinvestment, many people are turning to private healthcare not out of choice, but because they cannot afford to wait. This has increasingly led to unequal access to care. Ending the VAT exemption to generate much-needed revenue is a reasonable and widely supported step.”
The confirmation from Streeting brings clarity at a time when employers are increasingly relying on health and wellbeing benefits to support their workforce.
Rising demand for private medical insurance (PMI) and health cash plans has already made healthcare benefits central to recruitment and retention strategies. An additional tax burden would likely have driven up costs, restricted access, and placed more pressure on employers trying to meet workforce expectations.
Broadstone’s head of health and protection Brett Hill said: “It is pleasing to see the government putting distance between tax measures that would limit access to private health treatment and heap more strain onto our over-burdened NHS.
“The private sector is playing an important role in our country’s healthcare crisis by delivering record admissions amid growing uptake of products like PMI and health cash plans. We would also like to see clarity that insurance premium tax will not be hiked. If anything, this tax should be reduced for private healthcare services to increase access, to enable earlier and cheaper medical care and to protect the NHS from additional pressure.”
The government’s stance effectively protects employers and employees from sharp rises in benefit costs while reinforcing the private sector’s role in supporting the health system. Although VAT has been ruled out for now, the broader debate over how best to fund the NHS is likely to continue, and HR professionals will need to remain alert to potential shifts in tax policy that could affect the provision of workplace healthcare.
