Insurance costs set to rise as a result of increase in Insurance Premium Tax
Millions of individuals in the UK have been warned that their insurance premiums are set to rise as a result of an increase in Insurance Premium Tax (IPT).
On 1 June, the rate of IPT increased from 10% to 12%. The IPT rate has doubled in the last two years, rising from 6% in 2015 to its current level.
Motor insurance, as well as home, pet and health insurance, will be affected.
The British Insurance Brokers’ Association (BIBA) warned that excessively expensive insurance policies could lead to individuals forgoing insurance altogether, or choosing to reduce their cover.
Meanwhile, the Association of British Insurers (ABI) suggested that the latest increase could potentially add an additional £47 to the average annual household bill.
James Dalton, Director of General Insurance Policy at the ABI, stated: ‘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.’
However, a Treasury spokesperson responded: ‘IPT 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.’