Review of Insurance Premium tax in Budget 2016

After a rise from 6% to 9.5% five months ago, Insurance Premium Tax (IPT) saw another increase to 10% in this week's budget. Although this rise in tax on general insurance premiums is lower than the 12% predicted in pre-budget speculation, it is still a blow to businesses. In recent years, insurance premium costs have been decreasing, but studies showed an increase last year. With further rises now expected, many have labeled the rise in IPT a ‘stealth tax’.

Impact on Businesses

Higher insurance premiums mean that businesses will face increased operating costs. This could result in lower profits or a rise in charges for services or products. Some businesses may feel financial pressure to cut back on their insurance cover, placing them at increased risk and precariously exposed to dangers such as fire, flood, and theft.

Impact on Consumers

Experts calculated that last year’s rise added £100 to the average family’s insurance bill. This further increase is an additional burden for responsible consumers.

Government Plans

Chancellor Osborne proposes to use the £700 million produced by this tax to boost resilience and flood defences. We hope that this money is well-managed and has a strong and positive impact in protecting homes and businesses.

At a time when financial security is particularly precarious for many households and businesses, any further increases to IPT are of great concern, as they impose greater financial burdens or threaten to impact the levels of insurance cover and protection arranged for when things go wrong.

If you have any questions or concerns, you are welcome to call us on 0191 438 79 77 for further information or advice.