NU Online News Service, June 22, 3:45 p.m. EDT
To balance its budget, the United Kingdom government included in its emergency budget an increase in the standard insurance premium tax rate (IPT) from 5 percent to 6 percent, which insurers say will hurt consumers.
The increase is part of a range of tax increases and spending cut measures aimed at bringing down the country’s budget deficit, according to TMF VAT & IPT Services in the U.K., which provides international indirect tax compliance services.
There also is to be an increase in the U.K.’s value-added tax (VAT) from 17.5 percent to 20 percent, beginning Jan. 4, 2011.
A spokesman from the Association of British Insurers said, “Raising IPT is a direct tax increase for the vast majority of people who sensibly protect themselves and their families with insurance. This is regrettable and could have serious unintended consequences if it puts off consumers from protecting their homes, cars, holidays and everyday living.”
He explained, “For the average household, a 1 percent increase in IPT will mean an increase of ?7.99 per year ($11.83 at current exchange rate), from ?839 ($1,242) to ?846.99 ($1,254.64).”
In the past few months, the U.K.’s Treasury had been comparing the IPT rate with the rest of Europe. This new rate will now more closely match many other European IPT levies–although it still falls short of Germany’s 19 percent and Italy’s 21.25 percent rates, TMF said.
Tiger, an online insurance market, said in a statement that insurance lobby groups as well as industry experts have made it clear they feel the tax would be detrimental to individuals as well as small businesses.