Insurance Premium Tax Rise – another squeeze on households

George Osborne’s first purely Conservative Budget has landed a heavy blow on insurance buyers. He has increased insurance premium tax by 58%. The vast majority of policies will be effected with a rise in the standard rate from 6% to 9.5% from November this year.

Insurance Premium Tax (IPT) was originally introduced in the 1993 budget by another Conservative Chancellor of the Exchequer, Ken Clarke, at a rate of 2.5%. Insurance premiums have always been VAT exempt – the principle behind this being that any extra cost to insurance was seen as a disincentive for people to insure and would result in governments footing the bill for non-insurance. Following Chancellors very quickly realised that IPT like VAT is a very cheap tax to collect as unlike income tax someone else does the collection and accounts to the Treasury for the whole amount.

Castleacre Director, Hugo Johnsen, said:”This is the 4th time since 1993 that IPT has been increased and rather like Dracula our Chancellors have now developed a taste for it so beware – I wouldn’t be surprised to see it equal the VAT rate one day!’