In the summer budget announcement George Osborne announced that Insurance Premium Tax would be rising.
Understand how, when and why this will affect you…
What is Insurance Premium Tax?
Insurance Premium Tax (IPT) is a tax on general insurance premiums. There are two rates; a standard rate of 6% and a higher rate of 20% for travel, electrical and certain vehicle insurance.
From 1st November 2015 the standard rate of 6% will increase to 9.5%.
How will the increase affect you?
As the standard IPT rate is charged on the majority of insurance products this will mean an increase in prices across the insurance market.
Moneysupermarket.com estimates that an average household could expect to pay an extra £35 a year for household and motor insurance.
The increased rate will also affect business insurance and structural warranties from all providers.
Why is this increase happening?
The rise in IPT is a way of increasing funds. When you consider IPT raises around £3bn for the UK government and KPMG estimate the 3.5% rise to be worth an additional £1.75bn, you can see it is not an insignificant figure.
You can read about further changes likely to affect the housing industry here.
By Craig Ross