A little-known insurance stealth tax is set to raise £46billion for the Government over the next five years – more than road tax.
Insurance premium tax (IPT) adds 12 per cent to the price of car, home and pet insurance, and 20 per cent on travel insurance and many forms of add-on cover.
IPT is one of the least well-known taxes in Britain, with 67 per cent of adults having no idea what it is, according to the Association of British Insurers.
Despite the lack of knowledge surrounding it, IPT is fast becoming one of the most expensive stealth taxes.
IPT will rake in £46billion from this financial year to 2030, according to forecasts from the Office for Budget Responsibility (OBR).
That is up 40 per cent on the £32.9billion paid in the previous five years, and an increase of 132 per cent on the five years before that (£19.8billion).
Not only that, but the amount of money insurers are forecast to pay in IPT has been increased.
The OBR predicted IPT will rake in £42.4billion over the next five years at the time of the 2024 spring Budget, but has now upgraded that to £46billion.
IPT is levied directly onto insurers, who then typically pass the bulk of the cost onto households taking out the product.
The level of IPT has come under fire from groups including the ABI and the British Insurance Brokers’ Association, who called on chancellor Rachel Reeves to lower the tax in her latest Budget, which she did not do.
By 2030, IPT will rake in more than well-known taxes such as tobacco duty, road tax and air passenger duty, and almost as much as alcohol duty and inheritance tax.
But unlike the ‘sin’ taxes mentioned above, IPT is a tax on doing the right thing – being responsible and buying insurance.
