Protection  

Industry calls on Chancellor to spare insurance tax rise

Industry calls on Chancellor to spare insurance tax rise

Trade bodies and providers have called on the government to freeze insurance premium tax (IPT) in the upcoming budget, calling it the "mother of all stealth taxes".

IPT is a charge on general insurance premiums, including private medical and business, paid for by the consumer.

Figures from HM Revenue and Customs show the tax office raised a record £1.35bn in IPT in August, £200m more than in the same month last year and four times more than it predicts to raise from "sugar tax" in the whole year.

The tax has already increased on three occasions between November 2015 and June 2017 - doubling from 6 per cent to 12 per cent.

But consumers are unaware they are paying this charge, according to a report commissioned by the ABI in October 2017, which found 48 per cent of the UK population did not know IPT existed despite an expected annual cost of £200 per household.

Based on HMRC tax receipts for the past year the ABI claimed the government has raised more money from IPT than from "sin" taxes on beer, wine or gambling.

Huw Evans, director general at the ABI, said: "IPT is the mother of all stealth taxes. Despite insurance customers paying more and more of it, many people still remain unaware of it.

"Insurance customers are responsible people, abiding by the law and taking sensible steps to protect themselves, yet this responsible behaviour has been punished by repeated rises in IPT.

"The chancellor should look elsewhere in his efforts to balance the books."

The comments come after the ABI relaunched its #IPTsUnfair campaign earlier this month, demonstrating the "absurdity of punishing people who are doing the right thing".

Today (26 October) insurer Bupa launched a social media video campaign highlighting the impact IPT has on the NHS and calling on the government to refrain from raising it further.

Bupa predicts IPT is costing the NHS £126m a year by pushing private patients back onto the service when they cancel their health policies due to rising tax costs - an annual figure equivalent to 5,400 nurse salaries.

Since 2005 Bupa estimates almost 200,000 people have cancelled their private health policies under these circumstances and claims it is placing increasing pressure on an already stretched NHS.

Rob Harvey, head of protection advice at Drewberry, said: "The ‘raid on the responsible’ by the Exchequer over the past few years has been truly astonishing.

"It absolutely does heavily impact people doing the right thing – and in the case of cover such as motor insurance the legally required thing – by protecting themselves against various risks life throws at us."

Mr Harvey said long-term insurance contracts such as life insurance and income protection remained exempt from the tax, allowing consumers to protect their lives and incomes without having to pay IPT.