Tag Archives: Government

Our Open Letter to the Treasury, don’t increase IPT!

With rumors of the government increasing Insurance Premium Tax again, we sent an open letter to our MP, Mims Davies. Continually increasing the tax on socially positive motor & home insurance acts as a disincentive to buy, hits the poorest hardest & shouldn’t be a cash cow for the Treasury:

Mims Davies
The House of Commons
London
SW1A 0AA

October 2018

Dear Mims Davies MP

Airsports Insurance Bureau is a firm that provides insurance in your constituency. Our firm helps to arrange insurance for business and consumers throughout the area and in our capacity as agent of the customer; we act in the best interests of insurance buyers, finding them the best policy for their needs.

We are greatly concerned by the sudden and sharp increases in Insurance Premium Tax that have happened since November 2015 – doubling the rate from 6% to 12%. Further, the Chancellor has indicated that further increases are not only possible – but are likely.

Insurance Premium Tax was introduced in 1993. Before this, the purchase of insurance attracted no tax. Insurance allows people to take responsibility for themselves and their assets, and actually reduces the burden on the state should things go wrong.

Our trade body, The British Insurance Brokers’ Association, has made a comprehensive representation to HM Treasury, calling for a freeze in the rate of Insurance Premium Tax: https://bit.ly/2xWD7p3

As a regressive tax, Insurance Premium Tax penalises those who pay more for their insurance. This includes groups such as young drivers and communities in flood risk areas. For example, the tax contribution for a £1,500 young driver’s policy has increased from £90 to £180 in the last 24 months alone. With young drivers more likely to drive without insurance, any further increases are likely to have an impact on the number of uninsured drivers on the UK’s roads.

HMRC’s policy objective IPT01300 states “that IPT should make the required contribution to UK Government revenue while minimising the effect on the take up of insurance”. It is clear such significant increases are indeed likely to be to the detriment of uptake.

In your capacity as our local MP, I would be very grateful if you could take up this issue with the Financial Secretary to the Treasury, Mel Stride ahead of the Budget this month, calling for a freeze in any further increases for the term of this Parliament.

Yours sincerely,

Airsports Insurance Bureau

Chancellor Announces Another Increase In Insurance Premium Tax (IPT)

Many of you will be aware that most general insurance policy premiums are subject to Insurance Premium Tax (IPT) at 10%. The sort of policies this applies to include the likes of, motor, home, private health insurance and pet insurance.

That’s all about to change as the Chancellor of the Exchequer announced in his Autumn Statement of a few days ago that this tax was being increased by 2% to 12% with effect from the 1st June 2017. This will be the third time this tax has been increased since November 2015. On the 1st November last year IPT went up from 6% to 9.5% – a rise of 3.5% and then it increased by 0.5% to 10% on the 1st October 2016.IPT Increase

This means that, if you are currently paying say £500 per annum for your motor insurance, say £400 per annum for your home insurance, say £300 per annum for your pet insurance and say £1,000 per annum for your private health cover then you would see your total premiums for these policies increase by £44 per annum which, if you pay monthly, means that you would have to find an extra £3.66 per month. This increase would exceed the forecast saving of £40 per annum that motorists may make if certain changes proposed by the Government were made to how whiplash claims are dealt with as referred to in our news article of the 17th November 2016.

This announcement has not gone down well with many in the insurance industry including the Association of British Insurers (ABI) that is concerned how hard it will hit some people. Of course, this increase will particularly affect those who are paying the highest premiums for their cover such as young drivers and motorists living in some inner city areas. Unfortunately, this rise may result in more uninsured drivers on our roads.

IPT IncreaseThe ABI estimate that in excess of 50 million policies will be affected by this increase. Apparently, in Europe, the UK will have the 6th largest rate for IPT. It is estimated that by 2018/2019 Insurance Premium Tax will add around £6 billion to the Government’s “coffers”. The 20% IPT rate used for what some consider to be luxury insurance products including travel insurance, mechanical/electrical appliances insurance and even spacecraft insurance has remained unchanged.

The government will argue that the general cost of IPT throughout Europe is 19% but this does not take into account that the average motor insurance premium paid by UK’s drivers is significantly higher to begin with. In fact, the UK has the fourth most expensive average motor insurance premium in the world (behind the US, Austria and Germany).

It is to be hoped that this announcement does not encourage some policyholders to cancel any of their insurance policies as they no doubt provide valuable cover. In the case of motor insurance, it is a legal requirement that motorised vehicles are insured unless they are kept off the public road system and declared SORN (Statutory Off Road Notification).

Here at AIB Insurance, whilst we can obviously do nothing to prevent this increase in IPT, we will continue as we always have done to endeavour to provide our customers with competitive quotations for their insurance policies from the extensive panel of insurers at our disposal.