Did you know that Insurance Premium Tax (IPT) costs each household more than £200 per year, and raises more than beer and cider duty, while also rising faster than taxes on cigarettes, despite half the population having never heard of it.
Levied at 12% on most general insurance premiums, IPT has doubled in the past three years, which has resulted in policyholders paying on average 6% more for insurance than they did in 2015.
When this is put into perspective, health insurance today costs on average £117 more per year than it did three years ago, while comprehensive motor cover has risen by £25 and pet insurance is up by £20.
Furthermore, experts are concerned that Chancellor Philip Hammond may increase tax rates again in this month’s budget on 29 October.
The think tank, Social Market Foundation, has also claimed the tax disproportionately affects the poorest in society.
Its analysis of data from the Office for National Statistics has revealed that the poorest 10% of society spend 3.1% of their disposable income on insurance, excluding life insurance, which is exempt from IPT. When comparing the two, the richest 10% spend just 1.7% of their disposable income on insurance.
However, it is not only households who have been feeling the strain since the tax has doubled. Zurich Municipal revealed that a quarter of public services and charities have cut their level of insurance since 2015, when the tax was set at 6%.
The survey further found that almost two-in-five public and the like organisations had to make difficult decisions to cut budgets in their organisation, while nearly one-in-ten had to make job cuts in order to meet insurance costs. One-in-five have comparably less cover in place as a result of the IPT rises, leaving them exposed to higher expenses from claims.
Just to be clear, Life Assurance is exempt from IPT!