Millions hit by increased bills as insurance tax goes up
Millions of people and businesses will be hit with increased insurance bills as the Government’s increase in Insurance Premium Tax (IPT) takes effect from the 1 June 2017...
This latest increase now means the rate of tax paid on most insurance policies has doubled, from 6% in 2015 to 12% – in a period of only 19 months. This has significantly added to the cost of policies as the Government now rake in over £7bn a year in IPT from UK insurance customers.
Steve White, Chief Executive of the British Insurance Brokers’ Association (BIBA), said:
“This rapid increase is unprecedented – between 1997 and 2015, a period of 18 years, there were only two rate rises, taking the rate from 4% to 6%.
“The Chancellor has indicated that more increases are possible, so this remains a massive cause of concern for our member brokers’ customers – who are also experiencing significant premium increases following Government’s changes to catastrophic injury awards.”
“Let’s be clear about this – it is a tax on protection and penalises those that take the burden off the state by showing responsibility and prudence. We feel this rise is counter-productive to what Government should be doing and we’re calling for a freeze of the tax for the term of the next Parliament.”
Because of the way the tax is applied, those that pay more for their insurance face the heaviest burden – such as those in less well-off areas, young drivers and those in flood risk areas.
For example, the tax contribution by young drivers paying a premium of £2,000 will be £240 per year, compared to £120 just 19 months ago.
The increase will also affect*:
- 20.4 million home owners/renters with contents insurance
- 20.1 million drivers with motor insurance
- 3.2 million home owners with mortgage protection
- 1.9m million people with private medical insurance
- 3.4m pet owners.
Small businesses also face a considerable increase to the cost of doing business as a result of this increase.
In recent research by BIBA, 90% of insurance brokers anticipated that a further rise in the tax on insurance will mean clients reduce their insurance protection or buy no cover at all.
Mike Cherry, National Chairman at the Federation of Small Businesses (FSB), said:
“The recent increases in insurance premium tax have hit our members, directly increasing the cost of doing business at a time when additional costs of doing business are already rising.
“If insurance premiums continue to increase, small business take-up of insurance will begin to dip, and it will be those most at risk that will be affected. Unlike VAT, businesses cannot claim back the cost of Insurance Premium Tax.
“We agree all parties should commit to a freeze on Insurance Premium Tax for the term of the next Parliament.”
Visit us here: www.biba.org.uk