Thursday 1st June May 2017
Insurance Premium Tax up again
Insurance Premium Tax (IPT) a government levy on insurance policies, has this week increased to 12%. This is the latest in a series of increases imposed by the government, which has seen the tax double in the last two years.
Although the government argues that it is a tax on insurance companies, insurers say the recent increases in the cost of motor insurance are partly due to the tax increase, and many fear there will be further increases to lift the tax towards 20%, the same as VAT.
Commercial Vehicle Direct works hard with its insurer partners to keep a lid on the cost of van insurance, but when margins are so tight, it’s clear that IPT has driven up the average cost of insuring your car or home.
And, because insurance is usually higher for younger and older drivers, it is this section of the population who are hardest hit by the tax. According to Confused.com, which monitors the price of car insurance, average premiums have rocketed by 16% in the past 12 months, the equivalent of £110 per policy. A typical comprehensive car insurance policy now costs £781.
The hardest hit have been 66 year-olds, who have forked out an extra 23% for their policies, but drivers under 26 years old have had to pay the most in monetary terms, a whopping £202 more than this time last year.
Opponents of IPT increases argue that insurance becomes unaffordable and some people will choose to drive without insurance at all. This is illegal; motor insurance is compulsory, but the government must balance the need to raise taxes without overly penalising people who want to protect themselves and do the right thing. A difficult balance to strike.
The 2% increase will raise an extra £680m for the Treasury this year, meaning the Treasury will take a total nearly £7bn in IPT as a result.