Any further rise in Insurance Premium Tax (IPT) would “hit millions of people doing the right thing”, the Association of British Insurers (ABI) has said.
IPT affects 50m car, home, pet and private medical insurance policies.
The insurance body has said the tax rise from six per cent to 9.5 per cent announced in the chancellor’s 2015 Summer Budget has added an extra £100 to the annual cost of insurance for many households and that the hike will raise more than £8bn over the next five years.
Ahead of the Chancellor’s Budget on 16 March, ABI has warned that it should not be seen as a ‘soft touch tax’ to raise revenue, after it released figures that estimate the last IPT rise could add more than £42 to the average private medical insurance policy and over £13 to the average comprehensive motor insurance policy.
In addition, it could add more than £10 to the average combined building and contents cover and another £10 to the average pet insurance policy, meaning an average family with two cars, pets and medical insurance could be paying an extra £100 a year.
“Insurance Premium Tax penalises the millions of people and businesses throughout the UK who do the right thing by taking out insurance to protect themselves against life’s expensive uncertainties,” James Dalton, Director of General Insurance Policy at the ABI, said.
“At a time when personal injury costs are pushing up average motor insurance premiums, a further hike in IPT is the last thing the UK’s hard pressed motorists need,” he added.
“And with the government keen to encourage keen to encourage less reliance on the state, any move that raises the cost of private medical insurance would be counter-productive.”