Insurers furious over premium tax increase in Autumn Statement
The insurance industry reacted with fury to the latest increase in premium tax (IPT) to 12%, the third rise in 18 months.
Describing the latest measure by Chancellor Philip Hammond in Wednesday's Autumn Statement as a “hammer blow for the hard pressed”, Association of British Insurers director general Huw Evans said the rise represented a doubling of the controversial tax since last year.
“It will hit consumers and businesses alike, hurting those who buy business, motor, property, pet and health insurance,” Evans said, adding that the government's claim any rise would be offset savings in by banning whiplash claims “just won’t cut it”.
Hammond said the government would legislate to end whiplash claims on motor insurance policies and save drivers around £40 a year in premiums.
“It is deeply disappointing that those individuals and businesses who do the right thing by taking out insurance face this indirect tax rise,” the company said in a statement.
AXA UK said: "The affordability of insurance is being fundamentally threatened. The country is already underinsured and ever rising insurance taxation could have the unintended consequence of making this situation even worse."
The increase in IPT is the third rise since the Summer Budget in 2015. Former Chancellor George Osborne announced an increase from 6% to 9.5% in the Summer Budget in July 2015 which came into effect in November of the same year. The rate was increased again to 10% in this year’s March Budget, coming into effect on 1 October.
The third increase today, to 12%, means the tax has doubled in less than 18 months.
IPT affects more than 50m policies and applies to policies purchased by businesses, charities and individuals. Taken together, the three increases will raise over £13bn for the government over five years, the ABI said.