Chancellor George Osborne announced the second increase to insurance premium tax (IPT) within months, taking the rate from 9.5% to 10%.
The IPT rate was increased as recently as November 1 2015, with that hike making many families’ insurance bills around £100 higher typically, according to the Association of British Insurers (ABI).
The November rise saw the tax increased from 6% to 9.5% as a result of the summer Budget. The Association of British Insurers (ABI) has previously warned that any further hike would be a “raid” on responsible consumers and could even drive some people to cut or do away with their cover.
It said any increase would be felt most sharply by those who pay the highest insurance premiums.
The Government said the latest IPT increase will help fund new flood defences and maintain existing ones. Its Budget documents said that if insurers pass on the cost of the latest rate increase to their business and household customers, the average combined home and contents insurance would increase by £1, and the average motor insurance premium by £2 per year.
The British Insurance Brokers’ Association (Biba) said it is “astonished” at the further increase in IPT.
It said the latest rise means that, year-on-year, insurance buyers have faced an increase in tax of 66.6% since March 2015.
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