The Association of British Insurers (ABI), which has long been lobbying against Insurance Premium Tax (IPT) hikes, has released new research which presents an updated analysis into the impact of IPT on UK households.
Conducted by charity Social Market Foundation (SMF) on behalf of the trade body, the study found that IPT costs households £223 per year on average – more than doubling the £87 average a decade ago.
“If the standard rate of IPT had remained at 5%, its rate prior to 2011, then the savings per UK household could be significant,” read the 17-page report. “For the current fiscal year, 2019/20, we estimate that households are directly paying about £58 per year more as a result of higher IPT.
“If the business costs associated with higher IPT are ultimately borne by households (either through higher prices or lower incomes/dividends), then the additional cost per household could be as high as £123.”
Describing IPT as a regressive form of taxation, the report noted how the lowest income 10% of households are being the hardest hit, with this segment spending 4.1% of their disposable income on insurance while the highest income block shells out 1.6%.
“This new report clearly shows how regressive and unfair insurance premium tax is,” stressed ABI director general Huw Evans. “IPT costs hard-working families £223 a year, just for doing the right thing and buying insurance to protect themselves.
“Businesses and public bodies are also losing out as this tax damages their bottom lines. We urge the government to cut this stealth tax in the March budget.”
Since 2015, IPT has doubled to the 12% standard rate.
Offering further insights, SMF research director and author of the report Scott Corfe asserted: “The data we have collected shows there has been no detailed analysis from the government on what rate IPT should be set at. It has gone up exponentially and our figures are clear: families with lower incomes are paying more every year.”
The UK Budget 2020 is scheduled on March 11.
