The latest hike in insurance premium tax (IPT) has come into force and is affecting more than 50 million policies, according to the Association of British Insurers (ABI).
The standard rate of IPT, which applies to most general insurance policies purchased in the UK, went up to 10% on Saturday, October 1, after it was increased by Chancellor George Osborne in the budget earlier this year.
The new rate increase follows a previous rise from 6% to 9.5% in November 2015. This means the tax itself soared by more than 66% in less than a year, the ABI noted.
According to the industry body, the IPT hike will likely add the following costs to policies:
- £6.50 to the average private medical insurance policy
- £2 to the average comprehensive motor insurance policy
- £1.60 to the average combined building and contents policy
- £1.50 to the average pet insurance policy
The ABI said people who have the highest insurance costs – such as young drivers or those with on-going medical conditions – attract the highest amounts of tax.
Businesses and companies are also affected when they buy cover for their premises, vehicles and business interruption losses.
The ABI criticised the government for the latest IPT hike and warned of its financial impact on insurance clients.
“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,” said ABI director general Huw Evans.
“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. Any further hikes would be indefensible,” Evans added.
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