Insurance premium tax to rise to 9.5%

Summer Budget 2015: The insurance premium tax rate will rise from 6% to 9.5%. The increase, which was revealed by Chancellor George Osborne in his Budget announcement yesterday (8 July), will come into force in November 2015.

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Osborne said: “Britain’s insurance premium tax is well below tax rates in many other countries. I am therefore today raising insurance premium tax, which applies to only one fifth of all premiums, to 9.5%, effective from this November.”

Chris Horlick, distribution director at AXA PPP healthcare, said: “Increasing the rate of insurance premium tax from 6% to 9.5% will potentially make the provision of private medical insurance less affordable to many larger employers, at a time when many such employers need their people to be healthier and more engaged and productive than ever, and when pressures on the NHS are increasing.”

Steve White, chief executive officer of the British Insurance Brokers’ Association, said: “We are extremely disappointed in this rise in insurance premium tax and will mean insurance will become more expensive for the public as a result. Those hit by this stealth tax will include the 20.1 million households with contents insurance; 19.6 million with motor insurance and 17 million with buildings insurance.

“The government has been working with the industry to reduce the cost of insurance for consumers, including a summit chaired by the prime minister. It therefore seems counterintuitive to be taking measures that will add to the cost-effectively taxing protection.

“We hope the government will review this rise and correct it in further budgets.”