Summer Budget: Households and motorists face higher insurance premiums
Chancellor George Osborne announced today that the standard rate of insurance premium tax (IPT) will go up from 6% to 9.5% from November 2015.
Although IPT is levied on insurance companies, the worry is the tax rise will be passed onto consumers through higher premiums.
The British Insurance Brokers’ Association (BIBA) predicts that 20.1 million households with contents insurance, 19.6 million with motor insurance and 17 million with buildings insurance will be affected by the tax hike.
“The Government has been working with the industry to reduce the cost of insurance for consumers – including a summit chaired by the Prime Minister. It therefore seems counterintuitive to be taking measures which will add to the cost – effectively taxing protection,” said BIBA CEO, Steve White.
British households and motorists have been benefitting from declining costs for home and car insurance premiums over the last few years.
While consumers across the board will be impacted by the changes to IPT, young drivers could be hit particularly hard.
Rod Jones, insurance expert at uSwitch.com, said: “Raising premium insurance tax is another kick in the teeth for young drivers, who are already struggling to pay sky high premiums without the advantage of a no claims discount.
“Drivers aged between 17 and 22 could now find themselves paying an average premium of £1,247 a year – an increase of almost £40 – before any other motoring bills have been paid. It’s high time a flat rate tax system was introduced,”
MoneySupermarket.com said the taxation paid on home and car insurance premiums will rocket by almost 60% from November, adding £35 to insurance bills for the average two car family.
The government is set to net an additional £1.75bn from the IPT increase, according to KPMG.