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Consumers have been hard hit in recent years by the seemingly ever-continuing hike in Insurance Premium Tax (IPT). Now standing at 12%, the impact on insurance policy costs has been significant. So, it begs the question, will IPT continue to rise?
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. It was introduced in the 1993 Budget at a rate of 2.3%. Since then it’s 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.
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The rate didn't change in the Autumn Budget of 2017, so for now the rate remains at 12%. But it is possible that it could increase again in the future as there have been several increases in the last few years. All eyes will be on the next Budget. 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.
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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