Will Insurance Premium Tax (IPT) continue to rise
Consumers have been hit by a series of hikes in Insurance Premium Tax (IPT) in recent years.
Now standing at 12%, the impact on insurance policy costs has been significant.
So, it begs the question, will IPT continue to rise?
Consumers have been hit by a series of hikes in Insurance Premium Tax (IPT) in recent years.
Now standing at 12%, the impact on insurance policy costs has been significant.
So, it begs the question, will IPT continue to rise?
What is Insurance Premium Tax?
Insurance Premium Tax is a tax that’s added to general insurance premiums such as car insurance, home insurance, and pet insurance. Most long-term insurance, like life insurance and medical insurance, is exempted from the tax. Most long-term insurance, like life insurance and medical insurance, is exempted from the tax.
Introduced in the 1993 Budget at a rate of 2.3%, it’s since been increased six times. After rising to 6% in April 2015, the rate doubled to 12% in June 2017.
There’s also a higher rate of 20% that applies to travel insurance, electrical appliance insurance and some vehicle insurance.
According to ABI (The Association of British Insurers), the tax increase was ‘unfair’ with costs per household calculated at around £200 more.
Are any more IPT rises expected?
The last rise in Insurance Premium Tax was in June 2017, when the rate doubled to 12%. Since then, it’s remained flat, but it’s possible that it could increase again in future.
The ABI is continuing to encourage the government to keep IPT down, as it’s those who can less afford the rate, such as young drivers and low income families that are most hard hit. In their 2022 manifesto , the British Insurance Brokers’ Association (BIBA) called for the government to lower IPT to 10%.
There are also concerns that further increases in IPT, added to already high insurance costs for younger drivers, could result in more uninsured drivers on the road than ever before.
For more information on IPT check out our guide on IPT and how it affects car insurance.
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