The Chancellor announced in the budget on the 8th July 2015 that Insurance Premium Tax will increase from 6% to 9.5% from the 1st November 2015. This will have a direct effect on all insurance policies by increasing premiums by 3.5%.
The British Insurance Brokers Association said it was “extremely disappointed” in the decision and described the rise as as “stealth tax.” They highlighted that the government had been working with the industry to reduce the cost of motor insurance for consumers, which included a summit chaired by the Prime Minister. “It therefore seems counter-intuitive to be taking measures which will add to the cost – effectively taxing protection.” The AA Insurance said the “outrageous hike could backfire by leading to an increase in uninsured drivers.” Insurance Premium Tax was introduced in 1994 at a rate of 2.5%. Since this period the tax has gradually increased to the new rate of 9.5%. There are some exceptions to this, such as individual travel insurance which follows the VAT rate of 20% and transit insurance for goods abroad which is not taxed.
Luker Rowe will continue to off the best advice for our clients, both individual and commercial, but all our clients need to budget for this additional 3.5%.