What does the insurance tax rise mean for you?

The latest increase in Insurance Premium Tax (IPT) took place on 1st October 2016 when the standard rate increased to 10%.  This will apply to most policies* effective after the 1st and any adjustments to policies in force before then after 1st February 2017.  
Since July 2015’s budget the IPT rate has increased from 6% to the new 10% rate.

The IPT is the tax on general insurance premiums, which in simple terms means all individuals and businesses will pay IPT on their policies.

What does this mean for you?

According to the Association of British Insurers (ABI)

An average motor policy will rise by £2 a year.

The average home policy will go up by £1.60 a year.

UK businesses will pay as much as £75 million more annually.

Those who pay the highest premiums (such as young drivers) will suffer the highest price increases.
Why the increase?

According to the government the tax has been increased in order to fund “increased investment in flood defence and resilience.”

Steve White, CEO of the British Insurance Brokers Association said, “IPT is a tax collected and remitted by insurers, it is a tax on premiums paid by all policyholders – motorists, householders and businesses large and small.”

“Whilst we support the additional spending on flood defences we believe that this could have been funded by the projected £1.5bn annual funds paid to the exchequer as a result of the increase in IPT put in place only last November which puts an increased burden on policyholders, many of who are suffering from on going flood damage.”

The industry’s concerns

There are some concerns that in the SME market and for personal insurances people might start to insure for incorrect values or not insure because of the rise.

What can you do?

We would recommend you talk to us.  As a broker we have strong relationships with many insurers which means we are not tied to just one company. It’s up to us to help you find you the best possible deal that is tailored entirely to your needs.

For a personal approach to insurance why not give us a call on 01494 450 450 or contact us here.

Sources: Biba, Insurance Age, ABI

*There are a few exceptions.

Life insurance
Mortgage insurance
Insurance for spacecraft
Commercial ships and aircraft
International railway rolling stock
Lifeboats and lifeboat equipment
Goods in international transit