Is the Chancellor about to increase Insurance Premium Tax for the second time in less than a year?
Rumours are circulating that The Chancellor of the Exchequer could raise Insurance Premium Tax (IPT) for the second time in less than a year in his Budget announcement on Wednesday 16th March.
George Osborne increased the Insurance Premium Tax from 6% to 9.5% in the 2015 summer budget, with the change coming into effect last November. It was the single biggest revenue raiser in the budget, with taxes estimated to be in the region of £8 billion over five years.
It was projected that the 2015 increase added £12.25 to the annual cost of insuring a car. The AA has said that a further increase in IPT to 12.5% could add £37 a year to the average car insurance premium and much higher, around £80, for young drivers.
Speculation of the hike has angered motoring groups and insurance associations.
Edmund King, the president of the AA poured scorn on Treasury Minister Harriett Baldwin MP’s comment that IPT is not a tax on consumers but on insurance companies.
He said in response, “[That’s] like saying fuel duty is not a tax on drivers but on petrol stations. Drivers are not wallets on wheels but appear to be treated that way by the Treasury. Car insurance is not a luxury but a legal necessity so should not be taxed like a luxury.”
The British Insurance Brokers’ Association (BIBA) said that a rise in IPT would discourage customers from taking out policies. This would add to the growing issue of uninsured drivers in the UK.
IPT may seem like an easy target for Mr. Osborne; despite raising the tax in November last year, car insurance premiums for some drivers, particularly men aged 17 to 20 have fallen in the longer term, cushioning the effect.
For other drivers though, increasing IPT is the latest blow in a long-term trend of rising insurance costs. Older drivers (men aged 61 to 65 and women age 71 and over) have seen the sharpest increases of any age group.
For hard-pressed motorists struggling to find affordable car insurance, it has never been more important to seek competitive quotes.
Call Insure Your Motor on 0800 557 1329, or get a quote online.
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