No insurance premium tax hike in this year's Budget

No insurance premium tax hike in this year's Budget

Insurance experts have breathed a sigh of relief that the chancellor did not increase Insurance Premium Tax again.

Over the past few Budgets, November 2015 and June 2017, chancellor Philip Hammond had hiked IPT from 6 per cent to 12 per cent.

In 2015 it was raised from 6 per cent to 10 per cent. Then in late 2016 Mr Hammond pushed it up again, announcing at the time: "Insurance premium tax in this country is lower than in many other European countries, and half the rate of VAT.

"In order to raise revenue, which is required to fund spending commitments I am making today, it will rise from 10 per cent currently, to 12 per cent from next June [June 2017]."

This had been hailed as a disappointment and a challenge to the insurance industry at the time, as reported by FTAdviser. 

According to the latest Budget documents, the tax is expected to bring in approximately £6.3bn in revenues each year over the next six years to 2023 to 2024.

Huw Evans, director general of the Association of British Insurers, said: "We are pleased the Chancellor has done the right thing by not increasing Insurance Premium Tax.

"IPT already brings in more than £6bn a year for government and it would have sent out completely the wrong message to increase costs any further for people who do the right thing by buying cover to protect themselves, their properties and their families."

Alex Perry, chief executive of Bupa Insurance, had strongly warned against an increase in IPT.

Last week (25 October) Mr Perry commented: "IPT is a tax on most insurance policies, including health – and it has doubled since 2015.

"The government has for years said it wants to help businesses to better support the health of their workforce. The effective tax rates facing businesses that invest in their employees’ health are particularly punitive.

"When added to benefit in kind taxes and National Insurance, the doubling in the rate of this tax means employers and employees can between them face an effective tax rate on health insurance premiums of between 49 per cent to 72 per cent depending on their income tax bracket."