Carmichael warns Government against sneaky Insurance Premium Tax hike

Northern Isles MP, Alistair Carmichael, has written to the Chancellor, George Osborne, urging him not to implement a reported 3% rise in Insurance Premium Tax, which would hit the pockets of millions of families. 

Reports have suggested that the Chancellor may announce a rise to 12.5% in the Insurance Premium Tax in next week’s Budget. Last year, the Conservative Government pushed the tax up by 3.5% to 9.5%. If the rate was to increase to 12.5%, the tax would have gone up by 108% in just six months.

Insurance Premium Tax (IPT) already hits millions of people doing what is legally required of them by taking out car insurance, but is also affects at least 50 million car, home, pet and private medical insurance policies. 

Commenting, Mr Carmichael said:


“I have written to the Chancellor telling him to refrain from this unnecessary and underhand tax hike. It probably would not make the biggest headlines from the Budget but the addition of an extra £100 to the annual cost of insurance for millions of people would be very unwelcome.


“Car insurance is a legal requirement and not the only insurance policy people have. An increase would affect breakdown cover, home, pet and private medical insurance policies. There is unlikely to be a family in the UK unaffected by this.


“A tax rise on car insurance would adversely affect younger and older people with higher premiums. In rural communities like Orkney and Shetland, having a car is a virtual necessity. The Coalition Government did all it could to support motorists in the highlands and islands with pump prices, but with media reports this week suggesting a possible fuel duty rise and this IPT increase, it is fair to say that any goodwill the last government had with local motorists would surely evaporate after the Budget.”




Notes to editors


The Association of British Insurers (ABI) has calculated that this hike could add more than £42 to the average private medical insurance policy, over £13 to the average comprehensive motor insurance policy, over £10 to the average combined building and contents cover, and over £10 to the average pet insurance policy.


The ABI has calculated that the decision to increase IPT from 6% to 9.5% in the Budget last July added an extra £100 to annual cost of insurance for many households in the UK.

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