The last two years have seen three rises in Insurance Premium Tax. By June 2017 it will have doubled to 12% since November 2015. These tax rises have directly led to higher insurance premiums for the already heavily-taxed motorist.
There has been some pre-Budget speculation that the Chancellor of the Exchequer will raise taxes to pay for social care and other government spending commitments. Ageas is urging the Chancellor to rule out any further increases in Insurance Premium Tax to pay for these. Another two percent rise would mean the average motorist paying out an extra £17*, while the youngest and oldest drivers could see rises of well over a hundred pounds. The Chancellor could even cancel the rise in June and show he is serious about helping those families just about managing with their household bills.
Any increase would come at a time when motorists are already facing large insurance price rises because of the Lord Chancellor’s deeply flawed decision last week to reduce the discount rate to minus 0.75% – a move that will also hit younger and older drivers more, with some predicting young drivers will have to pay as much as £1000 extra.
Andy Watson, Chief Executive at Ageas, comments:
“A decision by the Chancellor to raise Insurance Premium Tax again in this week’s Spring Budget will be a massive blow to motorists. A fourth hike in two years, more than doubling the original amount, will mean hard-working families paying considerably more for their car insurance premiums, especially as the cut in the discount rate will without doubt lead to prices being pushed up in the immediate future. Consumers are paying more for their insurance entirely because of government policies. It will lead to some people being unable to afford cover at all and see them risk driving uninsured on our roads.”
*Based on the ABI’s Q4 2016 average motor premium of £462. A 2 percentage point increase in IPT from 12% to 14% equates to a £17 increase.