by Nick Robinson | Nov 12, 2015 | Business, Business Planning, Personal Tax, Taxation
The answer to that question would most likely be a resounding ‘no’ from pretty much everyone. No one really wants to pay more tax. However, thanks to a new increase that came in on 1st November, most families across the UK will have to.
It’s a tax on insurance products, and it means that many households could see their bills rising by around £100. The new tax level will affect motorists, pet owners, home owners, renters, and anyone else who pays insurance on anything at all – which is the majority of the UK.
Before the rise, the standard rate of Insurance Premium Tax (IPT, which is paid each time anyone buys any kind of insurance policy in the UK) was 6%. Now it has risen to 9.5%.
The numbers are staggering; over 7 million car insurance policies, almost 5 million household policies, 3 million pet policies, and 3 million private medical insurance policies will be affected, as reported by the Association of British Insurers (ABI).
For some, the increase won’t make much difference; someone with a high number of no claims years on car insurance might, it is predicated, see a rise of £40. It is the younger or first time drivers who will really see a change, with the average motor insurance bill going from £1278 (bad enough) to £1319 for those aged between 17 and 22. Ouch. Some people, including Janet Connor, MD of AA Insurance, worries that this increase – which will possibly put insurance out of reach of many people – will tempt some to drive without the proper insurance in place. The key with insurance is to buy the best policy you can afford, but what will happen when the youngest generation can’t afford any at all? Will this mean that they won’t be able to travel to jobs? With cuts in public transport some, particularly those who live in rural areas, could be stranded without their cars.
It’s not just a case of having no insurance. And it’s not just about cars, either. All insurance is affected. Some might falsify information (age, address, occupation and so on) simply in order to have any kind of insurance premium at all. However, should they ever need to claim on that insurance and their untruths are found out, the insurance will be invalid, leaving them in dire straits.
The IPT rise is expected to bring in an extra £8.1 billion by 2021. It was originally introduced in 1994 at 2.5%.
What are your thoughts? Would you risk not having insurance – be it car, home, health, pet, or anything else – because it is becoming so costly? It’s a gamble, is it one you are willing to take?