The Government will raise insurance premium tax from 10% to 12% from June next year Chancellor Philip Hammond said last month in his first Autumn Statement address to Parliament.
The Government plans to net £4billion using the tax hike between 1 June 2017, when it is introduced, through to 2022. On average this will mean an extra £51 per year for families to pay on their household bills.
The Treasury insists that IPT is a tax on insurers and that motorists will actually be £40 per year better off due to their whiplash claims reforms and because of the freeze on fuel duty for a seventh year running.
As IPT is only charged on general, and not long term insurance, on average 80% of premiums are exempt from IPT.
The Chancellor was keen to point out that UK IPT rates are currently lower than many of the UK’s European counterparts.