Tax rise sees insurance premiums increase

Tax rise sees insurance premiums increase

Insurers have warned of rising premiums following a tax rise that has recently come into force.

The rate of Insurance Premium Tax (IPT) has risen from 10 per cent to 12 per cent, with these changes impacting home, pet, health and motor insurance.

Insurers have issued their concerns, saying that the average UK family will end up paying an extra £47 per year.

A number of chancellors have seen IPT as an unmissable opportunity to raise money as part of their budgets, with the latest rise meaning that the IPT rate has doubled in only a few years.

It is suggested that the tax increase will mean the average motor policy rises by around £8.

It is expected that £20 will be added to the premium of a 19-year-old driver, who is already likely to be paying much more than the average.

A spokesman for the Treasury said: “Insurance Premium Tax is a tax on insurers, not consumers – insurance firms decide whether to pass it on to their customers or not.

“IPT is higher in several European countries, including France and Germany, than it is in the UK.”

In total, the new rate of 12 per cent could add up to an extra £283 per year being placed on a typical household’s yearly insurance bill, with the rate doubling since November 2015, according to figures from the Association of British Insurers (ABI).

ABI director of general insurance policy James Dalton said: “With a doubling of IPT in just under two years it is time to call a halt to this raid on the responsible.

“This tax penalises hard working families, as well as businesses, who have done the right thing by taking out insurance to protect against many of life’s uncertainties.

“This latest hike must be the last. The next government must freeze this tax, to give hard working households and businesses a break.”

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