There was relief all round the insurance industry when the Chancellor, Phillip Hammond, kept Insurance Premium Tax (IPT) at 12% in the recent budget. However, industry leaders Association of British Insurers (ABI) and British Insurance Brokers Association (BIBA) will still campaign for the stealth tax to be reduced or at least frozen.
Insurance Premium Tax raked in a record amount for Government in just one month this year.
Official tax receipts for August show IPT raised a massive £1.35 billion for HMRC in a single month – the highest amount ever and £200 million more than it raised in August 2017. This is more than four times higher than the so-called sugar tax is expected to raise in a whole year (£300 million).
Further calculations show that the tax take from IPT for the last 12 months has now hit £6.13 billion, more than that brought in by taxes on beer, wine or gambling in the same period. The Treasury predicted revenues of £6 billion from IPT for the financial year 2018/19, so these new figures suggest that taxpayers are paying even more than expected.
The standard rate of IPT has been increased three times since 2015, last going up from 10% to 12% in June 2017. It applies to the vast majority of policies sold, including property, motor, health, pet and business insurance.
The Mother of all stealth taxes
IPT is regarded as the ‘Mother of all stealth taxes’ by the insurance industry because:
- Around half the population is unaware of its existence – much lower than many other similar taxes
- It’s levied on products regarded as either completely or mostly essential by 58% of people
- It raises more money for Government than taxes on beer, wine or gambling
- It’s set to cost every UK household £200 this year, given the knock-on effect on costs charged by a range of businesses
- The UK has the sixth highest rate of IPT in Europe
Commenting on the Budget, Huw Evans, Director General, Association of British Insurers, said: “We are pleased that the Chancellor has done the right thing by not increasing Insurance Premium Tax . IPT already brings in more than £6 billion a year for Government and it would have sent out completely the wrong message to increase costs any further for people who do the right thing by buying cover to protect themselves, their properties and their families.”
British Insurance Brokers’ Association (BIBA) CEO, Steve White, said: “We welcome Philip Hammond’s decision not to change the current rate already at a significant 12 pence in the pound of every premium paid. However in a way this amounts to a pyrrhic victory and we will not stop campaigning for Government to freeze, if not reduce, this rate of tax on insurance for the remainder of this parliament. We continue to highlight to the highest level of Government the dire consequences of a tax that potentially reduces access to insurance.”
The ABI’s digital campaign, #IPTsUnfair, has been viewed by nearly two million people on Facebook. It urges the Government to end its raid on the responsible by ruling out further rises in IPT. You can view the film here.
