UK consumers to pay higher tax on insurance from November 2015
Insurance premium tax increase should not encourage people to neglect their safety, says IPH Chairman
From November of this year onwards, British consumers taking out insurance policies will have to pay more money for the tax on their insurance premiums.
The current standard rate of Insurance Premium Tax is 6 per cent, after 1 November 2015 this figure will rise by 3.5 per cent, to cost consumers a total of 9.5 per cent. This means that every time a consumer purchases insurance, they will have to pay almost 10 per cent more on top of their premium.
The tax increase was announced in the Chancellor George Osborne’s Budget this summer. It will apply to medical, motor, contents, home, and all other forms of general insurance. Exemptions include permanent or long-term health insurance, aviation, railway and ship insurance.
Risks located outside the UK are exempt as well. For example, if a British citizen residing in Asia were to take out health insurance, they would not have to pay this tax.
The government’s justification
In his Budget announcement last July, Chancellor Osborne said that Britain’s insurance premiums were already much cheaper than in many other countries, and that “the cost of premiums are down for families”.
Government evaluation reports state that these changes will cause no impacts on British families and their stability. Reports also state that there will be no impact on businesses purchasing insurance.
IPH chairman responds to changes Dr Peter Wong-Morrow, chairman of IPH, said: “This tax increase will increase the burden on general policyholders and on families in particular. However, it is more important than ever for people to have good insurance, especially healthcare.
“Every day there are reports that the NHS is experiencing more and more financial strain, resulting in a lapse in their quality of medical care. But unfortunately accidents still happen, and British people will go on contracting illnesses. Wong-Morrow added: “This tax should not prevent people from putting the safety of themselves and their loved ones above all else.”
Trade association denounces tax hike
Notable members in the insurance industry have spoken out against the tax increase. Steve White, CEO of the British Insurance Broker’s Association (BIBA) called it a “stealth tax” and that the measure was “effectively taxing protection”. He said: “We are extremely disappointed in this rise in Insurance Premium Tax and will mean insurance will become more expensive for the public as a result.”
Note: IPH customers who reside in the UK should note that their insurance premiums will not change, but the amount of tax they must pay will rise accordingly.