The Association of British Insurers (ABI) has warned that the looming Insurance Premium Tax (IPT) hike will take its toll on the budgets of “hard-pressed households.” The levy will rise to 12% tomorrow – about eight months after the government hiked it to 10%.
This marks the third rise of IPT in just two years, said the ABI. The tax is payable on most general insurance policies including home, motor, pet, private medical insurance, and cash plans taken out by individuals, as well as commercial insurance taken out by businesses. Several products are exempted from IPT, including life insurance and mortgage insurance.
The average household will have to add £47 to its annual general insurance bill, according to ABI’s estimates. Indeed it said IPT’s 12% rate could be adding as much as £283 a year to a typical household’s annual insurance bill overall, as the rate has doubled since November, 2015.
According to the ABI, insurance customers who pay higher premiums will be worst hit, including:
- Young and older drivers who tend to pay more for motor insurance: “A typical 19 year old driver for example could see their annual motor premium increase by £20 following this latest rise,” it said.
- Those with private medical insurance and cash plans: They face an extra £39 a year on their premium.
- Businesses: The 12% rate could add an extra £300 to commercial insurance premiums.
James Dalton, director of general insurance policy at the ABI, called on the government to halt the increase.
“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,” he said. “This latest hike must be the last. The next government must freeze this tax, to give hard working households and businesses a break.”
IPT was first introduced on October 01, 1994 at a single rate of 2.5%. It has been raised six times since then, according to IBA records:
- April 01, 1997: increased to 4%
- July 01, 1999: increased to 5%
- January 04, 2011: increased to 6%
- November 01, 2015: increased to 9.5%
- October 01, 2016: increased to 10%
- June 01, 2017: increased to 12%
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