Autumn Statement - Insurers Fury at Premium Tax Hike

At a time when car and home insurance premiums are already on the rise, the average household could see as much as £51.00 added to their annual insurance bills.

The hit comes following the Autumn Statement, as Philip Hammond announced the third increase to Insurance Premium Tax (IPT) in 18 months. IPT was introduced in 1994 in an attempt to collect revenue from a previously “under-taxed” sector. From its inception, IPT saw incremental increases over the next 11 years to a rate of 6%. On 1st November, last year we saw it jump to 9.5%, thanks to then-chancellor George Osborne’s announcement in his annual budget. It was then announced that from October 2016 there would be a second, more gentle rise, of 0.5%, making the rate of IPT 10%. Despite this recent increase, Osborne’s successor Philip Hammond announced on Wednesday a rise of 2% to be implemented June 2017, making the standard rate 12% - this equates to a 100% increase in less than 2 years. Mr Hammond has said that “Insurance premium tax in this country is lower than in many other European countries” but various insurers have hit back, branding it the UK’s “fastest growing stealth tax”.

The British Insurance Brokers’ Association (BIBA) statement

The British Insurance Brokers’ Association (BIBA) has issued a statement asserting “This further increase to 12% in this regressive tax is outrageous and is a tax on protection which will hit everyone and especially those 'just about managing'”. The statement from BIBA goes on to say "This increase comes at a time when both motor and home insurance premiums are rising and our fear is that many of those who most need it will avoid taking up insurance and be unable to afford the protection they need."

Other key points from the Autumn statement

Growth 2.1% in 2016 – higher than forecast in March Borrowing £59bn forecast for next years, £46.5bn in 2018-19 and £21.9bn in 2020, to reach £17.2bn in 2021-22. Welfare No further welfare savings measures planned in this parliament, other than those which have already been announced. Housing A housing infrastructure fund of £2.3bn to create 100,000 new homes in areas of high demand £1.4bn to construct 40,000 affordable homes. Pilot of right to buy for housing association tenants Digital infrastructure 100% business rate relief on new fibre infrastructure. £1bn for broadband. NHS spending £10bn of additional funding a year by the end of 2020-21. Corporation tax Fall to 17% as planned by 2020 Tax thresholds Plan remains to raise the tax-free allowance from £11,000 to £11,500 in April and £12,500 by 2020. National living wage Rise from £7.20 to £7.50 an hour in April. National living wage Rise from £7.20 to £7.50 an hour in April. Click here to read more: News at ALA GAP Insurance.