An Insurance Premium Tax rise is branded “a raid on the responsible”
With the standard rate of IPT increased three times between November 2015 and June 2017, from 6 to 12 per cent, and the ease with which the tax can be collected, the temptation to continue raising IPT is one where the Chancellor should think very carefully about unintended consequences - like a rise in uninsured drivers. That would be both dangerous and costly for both insurers and their customers. There are some categories of purchase - like most food items and books - where a zero sales tax is wise for society. Insurance is a prudent purchase and should not be heavily taxed, if at all.

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Ahead of the forthcoming Budget, Ian Quarrington has spotted an article on the Honest John website where Dan Powell looks at the risk the Chancellor may increase Insurance Premium Tax yet again.

The article notes Huw Evans, director general of the Association of British Insurers, has said “The Chancellor has a difficult task ahead of him in this Budget but he should realise a raid on the responsible members of society who buy motor and other insurances is the wrong way to balance the books. People buy insurance because it is a legal requirement .and punishing these people with another tax rise would be inexcusable. The Association has urged the Chancellor not to penalise drivers further as he looks to balance the books in the forthcoming October Budget".
The UK has the sixth highest rate of Insurance Premium Tax in Europe since the standard rate of IPT was increased three times between November 2015 and June 2017, from 6 to 12 per cent. Insurance Premium Tax applies to all car insurance sold in the UK and is calculated on the basis of the cost of the individual policy, which means an extra 12 per cent effectively goes on top of what would otherwise have been the total cost.

According to the Social Market Foundation (SMF) think tank, Insurance Premium Tax now raises more revenue for the Government than beer, wine and spirit duties combined. About half of this is paid directly by households on insurance products, with the remainder paid by businesses. The SMF claim that business costs associated with insurance tax are likely, at least in part, to feed through into the finances of households – through higher consumer prices, lower dividends and reduced profits for business owners. Its forecasts suggest that the per-household annual costs of insurance tax will rise above £200 by the end of 2018.