June 2010: Insurance Premium Tax Increase

The budget on the 22 June 2010 saw the announcement of a rise of 1% in Insurance Premium Tax (IPT), from 5% to 6%.

The increase is part of a series of tax increases across most areas of the economy designed to reduce the UK's budget deficit. Chancellor George Osborne has described the rises as ‘unavoidable'.

The British Insurance Brokers Association (BIBA) is disappointed by the rise in IPT, saying it is concerned that consumers and businesses will be hit by increasing insurance costs that will "serve only to add further financial pressure during the recession and discourage individuals and small businesses from taking out adequate and appropriate insurance protection".

Eric Galbraith, BIBA chief executive, said: "This is a tax on protection, BIBA's research last year demonstrated that businesses and consumers were reducing insurance cover as a result of the recession and we are concerned that increases to insurance premiums as a result of IPT could lead to even further underinsurance, or even a lack of insurance protection. The last thing people need in a financial crisis is a higher insurance bill."

Cutting out or reducing essential cover could be a false economy for businesses and consumers. BIBA is urging customers to seek advice from an insurance broker who can help families and businesses to manage their insurance protection in the most cost effective way.