01 March 2024 , 09:39
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Calls have been made to cut a ‘hidden’ tax which is estimated to cost the public and businesses as much as £8 billion every year.
Insurance tax adds an extra 12% on to most insurance policies – which means an average of £67 is added to premiums for car insurance. This tax shoots up to more than £100 for households with a car when home insurance is added.
It comes after research of 2,000 adults with insurance found 31% have no idea Insurance Premium Tax (IPT) even existed, while another 36% only have a little knowledge about it. And half are unaware about exactly how much gets added to their policy cost because of this tax.
Snippy was created to unmask the 'hidden' tax ahead of the budget (The Association of British Insurers)Mervyn Skeet, director of general insurance policy at The Association of British Insurers, which has launched a campaign calling on the Chancellor to cut the tax levied on insurance, said: “It is high time we unmask this tax which penalises people and businesses for being responsible.
“This tax hits the poorest hardest because they normally spend more on insurance, such as home and motor cover, as a proportion of their income. Such a move would not only provide relief to hardworking families and businesses but also foster economic resilience.”
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The study also found 49% of those polled have become more conscious about how much they are spending on insurance since the start of the cost-of-living crisis. As a result, 58% have reduced cover or changed to a cheaper provider within the last 12 months. While 26% opted for a provider they had never heard of because they wanted to save money and 21% removed additional extras they had previously included. Now, 36% are worried they might not have the appropriate level of cover in the event of an emergency.
Consequently, just 6% of those polled, via OnePoll, who have taken out insurance would oppose a cut on this taxation. Nearly seven in 10 (68%) feel people are being penalised for being responsible and getting insurance, while 63% are of the belief that taxing on essential items should be minimal.
As a result, the Association of British Insurers campaign has seen Plunge Creations, the costume makers of ITV ’s The Masked Singer, create Snippy, a giant pair of scissors unmasking this ‘hidden’ tax ahead of the budget.
Mervyn Skeet added: “Since its introduction, Insurance Premium Tax has increased more rapidly than the tax rate applied to alcohol and gambling. Today we call on the Chancellor to use next week’s Spring budget to cut the standard insurance premium tax rate. It penalises people for being responsible and a cut will help hard working households and businesses offset escalating costs and protect their families and livelihoods against sudden financial shocks. There has never been a better time for the government to show its support to the millions of homeowners and businesses who do the right thing by buying insurance.”