Insurance Premium Tax branded “a raid on the responsible”

The Association of British Insurers has branded Insurance Premium Tax rises as “a raid on the responsible” and 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 was increased three times between November 2015 and June 2017, from six to 12 per cent.

>>>How to save on car insurance

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.

“The Chancellor has a difficult task ahead of him this Budget but he should realise a raid on the responsible is the wrong way to balance the books"

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.

Huw Evans, director general of the Association of British Insurers said: “The Chancellor has a difficult task ahead of him in this Budget but he should realise a raid on the responsible is the wrong way to balance the books.

“People buy insurance because it is a legal requirement...punishing these people with another tax rise would be inexcusable.”

Chancellor of the Exchequer, Philip Hammond, will present his Budget to Parliament on Monday 29 October