Insurance Premium Tax will rise from 9.5% to 10% from 1 October 2016, Chancellor George Osborne announced today.
The increase is to fund investment in flood defence and resilience measures. It last rose on 1 November 2015 when it increased from 6%.
But while IPT is a tax on insurers, it’s typically passed on to consumers. The Government says if this 0.5% increase is passed on, the average combined home and contents insurance policy would increase by £1, while the average motor insurance premium would rise by £2 per year.
Steve White, CEO of the British Insurance Brokers’ Association (BIBA) CEO says: “Let’s be clear about this, IPT is a tax collected and remitted by insurers, it is a tax on premiums paid by 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 in the increase in IPT put in place only last November which puts an increased burden on policyholders many of whom are suffering from ongoing flood damage.”
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