Insurance costs to rise as new tax increase comes into force
- Credit: PA
Millions of people could face increased insurance bills as a tax hike takes effect from this week.
From tomorrow, the rate of insurance premium tax (IPT) will increase from 10pc to 12pc - in a move which will mean the rate has doubled in less than two years.
The tax is payable on most general insurance policies including home, motor, pet and private medical insurance, as well as commercial insurance taken out by businesses.
The Association of British Insurers (ABI) calculates that the latest increase could add an extra £47 to the average household's annual general insurance bill, based on a family with pets and a young driver in the household.
The ABI estimates that overall, the 12pc IPT rate could add an extra £283 a year to a typical household's annual insurance bill as the rate has now doubled since November 2015, when it was increased from 6pc to 9.5pc.
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The rate was hiked again in October 2016 to 10pc - making tomorrow's increase the third increase in less than two years.
The ABI said insurance customers who already pay the highest premiums will be hit hardest by the hike in IPT.
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It said that, for example, a typical 19-year-old driver could see their annual motor premium increase by £20 following this latest rise.
Those with private medical insurance and cash plans could face an extra £39 a year on their premium.
Businesses will also be hit, it warned, estimating that the 12% rate could add an extra £300 in commercial insurance premiums.
James Dalton, director of general insurance Policy at the ABI, said: 'With a doubling of IPT in just under two years it is time to call a halt to this raid on the responsible.
'This tax penalises hard-working families, as well as businesses, who have done the right thing by taking out insurance to protect against many of life's uncertainties.
'This latest hike must be the last. The next government must freeze this tax, to give hard-working households and businesses a break.'