Summer budget tax hike may push up insurance premiums
With the new Summer Budget having been decided upon, the outcome for Insurance Premium Tax has brought up the issue of how insurance premiums will be affected.
Following the Budget, IPT has been set to rise from 6% to 9.5% from November of this year. The IPT will affect the majority of insurance types, including:
- car insurance
- pet insurance
- mobile insurance
- contents insurance
- buildings insurance
- private medical insurance
IPT was initially introduced as a tax on insurers back in 1994. Now, though, most of the tax is passed on to customers, filtering down to culminate in their premiums instead, raising them quite considerably.
Effect of Higher Insurance Premium Tax on Car Insurance
Looking predominantly at car insurance, this considerable rise in IPT is set to affect premiums quite drastically, particularly affecting young drivers’ costs. A recent estimation by comparison site uSwitch sees drivers between 17 and 22 years of age paying an average premium of £1,247 a year from November onwards. Though they may be hit hardest by these changes, young drivers are not the only ones who will feel the effects of the rising IPT. AA Insurance has predicted an average increase of £17.50 on all car insurance premiums around the country.
The increases come after a notably lower average premium recorded at the end of March 2015 of around £530, having fallen from a peak of £742 at the end of 2011. Unfortunately, premiums were already increasing before the latest IPT changes, with managing director of the AA Insurance, Janet Connor, now warning of a 10% increase by the end of the year.
This increase is negative, not only for monetary purposes for drivers throughout the UK, but also for the safety of our drivers and, indeed, our roads. Since the insurance will rise, there will be greater numbers of uninsured drivers on the road which, in turn, will make problems worse. Connor notes that those who are unable to afford the expensive car insurance premiums as they are may well be tempted to avoid paying altogether and drive uninsured, causing serious safety breaches not only to themselves but to other drivers and vehicle owners.
With car insurance as just one example, it is clear that this increase in Insurance Premium Tax will bring a wealth of negative effects to the country’s economy before realising any of the positive effects forecast for it.
Here at The Insurance Store, we are the proud providers of high quality insurance services, including car and home insurance. Offering our customers the best policies we can find for them, we are always on hand to help with any insurance-related queries thanks to the expertise of our knowledgeable teams. To find out more about how we can help you, get in touch with our friendly team today – we’ll be happy to help, whatever the enquiry.