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Home insurance should not be taxed as a luxury

Tony Hazell

Tony Hazell

In just over couple of months insurance premium tax (IPT) will rise again in a further attack on people who take responsibility for their lives and possessions.

From a basic rate of 6 per cent less than a year and half ago, the rate will have doubled to 12 per cent in June this year.

This illogical and punitive tax rise treats insurance as a luxury whereas in many cases it is either essential or a foundation of self-reliance.

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In the case of car insurance, 26.5m drivers will pay more. It is not unreasonable to speculate that more people will try to dodge insurance as a result of the heavy increases.

Home insurance is not a luxury, yet if premiums carry on rising, driven in part by these IPT increases, then surely less well-off home-owners and tenants will be tempted to skimp or cancel policies altogether.

Of course there are exemptions including life insurance. But look closely at the list and you begin to feel that somebody or some group of people have made intriguing value judgments.

Why is mortgage insurance, which is exempt from IPT, deemed to be more important than household insurance?

Surely the consequences of your home burning down or being stripped by burglars are as bad as being unable to afford your mortgage payments through loss of a job?

Why is spacecraft insurance exempt yet motorists must pay?

Why must individuals pay 20 per cent on travel insurance – which includes cover for their possession in transit – yet businesses pay nothing on goods in international transit?

Those who buy medical insurance are charged 12 per cent. Yet surely by taking responsibility for the costs of some of their own healthcare they are relieving the burden on the NHS. This used to be recognised in the form of tax relief on premiums for pensioners, but now it is treated as if it were a social ill. 

The Institute of Economic Affairs has pointed out that employers get better incentives for caring for their plant and machinery than they do for caring for employees.

A company that buys insurance to protect machinery can write the cost off as a business expense. But if the same company buys private medical care for its employees it must pay employer National Insurance on the costs of the insurance as well as IPT.

It is a sad reflection on the moral position of a government when self-reliance is regarded as a source of taxation rather than a cause for support and celebration.

Poor unloved Lisa

Lisa must be the most unloved financial product any government has devised.

Tessas, Peps and Isas went with a bang as savers and investors lined up and the industry competed for funds.