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Summer Budget: Insurance premium tax

Hike in insurance tax gets thumbs down

car insuranceInsurance premium tax will rise from 6% to 9.5% from  November 2015. This will add £19 a year to the cost of an annual motor premium of £530 and £5.55 to the annual £158.66 cost of home insurance.

Huw Davies, director general of trade group the Association of Insurers criticised the tax hike: “Insurance Premium Tax is a tax on people and businesses at the point at which they buy a general insurance product.

“So it’s very disappointing to see a more than 50% tax increase being imposed on consumers, especially when the insurance industry and Government has worked so hard in recent years to bring down the cost of essential insurance.”

Lindsay Hayward, financial services tax partner, PwC in Scotland said: “It was mixed news for the insurance sector.  The cut in corporation tax to 18% by 2020 will reinforce the competitive nature of the UK overall but with our insurance sector operating on a global stage, it will be crucial that the Chancellor continues to ensure it remains the most competitive location in the G20.

“This positive feeling will be tempered by the rise in the standard rate of insurance premium tax to 9.5% from 1 November, changes to pension relief and greater regulation of claims management companies. The details of these proposed measures have yet to be revealed, however, it will  be important that these new rules don’t create uncertainty and unnecessary cost for business.”

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