Insurance premium tax causes public outcry

An increased tax rate affecting numerous policies has affected millions of households.

The standard rate of insurance premium tax (IPT) that applies to most general insurance policies bought in the UK, has increased from 9.5 percent to 10 percent.

The hike is expected to push up the cost of new policies bought by a wide range of insurance customers, including those buying home insurance, motorists, private medical insurance customers and pet owners.

It is the second increase to the tax rate in less than a year – and some in the industry have warned it could lead to a spike in uninsured driving, particularly among younger motorists who already tend to pay more for their cover, according to the Express.

The government has said the latest IPT increase will help fund new flood defences and maintain existing ones. According to calculations by the Association of British Insurers (ABI), the impact of both recent increases to the tax will add more than GBP16 to the average comprehensive motor insurance policy; more than GBP12.50 to the average combined building and contents policy; more than GBP12 to the average pet insurance policy and over GBP52.50 to the average private medical insurance policy. In the second quarter of 2016, the average comprehensive motor insurance premium was GBP434, up 10 percent on the same period a year earlier, according to the ABI’s figures.

ABI director general Huw Evans said: “These two IPT increases are a raid on the responsible, taking advantage of those who already do the most to avoid becoming a burden on the state. The Government should be in no doubt that such steep increases in insurance premium tax may eat into the finances of both households and businesses.”

Mike Lloyd, insurance director at the Automobile Association, has said IPT should now be “left alone” by the Government. “Our message is clear. Any hike in insurance premium tax will lead to spikes in uninsured driving,” he said.