Further Increase in Insurance Premium Tax
Holiday home and second home owners are braced for further increases in their insurance premiums following the government’s announcement that insurance premium tax will rise to 12% from June 2017. The move, announced by the chancellor Phillip Hammond in the autumn statement, follows two earlier increases in 2016 of 3% and 0.5%, raising IPT to 9.5% and 10% respectively.
This next increase means IPT will have nearly doubled in the past 18 months. With such a rapid increase many in the insurance industry are concerned about the knock on effects on policyholders, especially as there has never been a reduction in the standard rate of IPT since the tax was introduced in 1994. The Association of British Insurers has described the increase as a “hammer blow for the hard-pressed” and the industry has described IPT as the UK’s fastest growing stealth tax.
As a proportional tax based on a percentage of the premium any inflationary pressures are already factored in, making these continued increases hit even harder in the pocket of the consumer. It’s expected that homeowners, holiday homeowners and second homeowners in London and in high risk areas will be dis-proportionally affected by the increase in IPT. This is because the premium is not based solely on the value of the subject matter of the insurance but also by the risk transferred under the policy, making riskier policies more expensive.
Insurers are now expecting more pressure from consumers as they continue to seek the best value for their insurance policies.
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