Insurance premium tax to increase on 1 November 2015
As announced in the July Budget, insurance premium tax will increase on 1 November 2015 from 6 per cent to 9.5 per cent. The previous increase was in January 2011 when it increased from 1% to 6%.
Insurance premium tax (or IPT) is a tax on insurance set by the Government, which is added to insurance products such as car and home cover.
Consequently insurance will become more expensive for the public, including the 20.1 million with contents insurance, 17 million homeowners with buildings insurance and 19.6 million with motor insurance. It’s estimated that the IPT increase will cost households an extra £60 per year.
Tips to avoid the premium hikes
- If you pay for your insurance annually then the rise will not come into effect until you renew (after 1 November 2015). If your insurance is due for renewal before 1 November then paying for a year up front, rather than on a monthly basis may be cheaper.
- Shopping around could save more money than the tax increase, but don’t choose a policy based on price alone. Opt for value and comprehensive cover.
- If your renewal is due in early November then you may be better off cancelling it and taking out a new policy before 1 November. Be mindful of any admin fees, not getting any premium back for the remainder of the policy, as well as losing a year’s no claims bonus.
Insurance often seems overly expensive, especially if you never have to make a claim. But if you are ever unfortunate enough to have to make a claim, it can suddenly seem very good value.
Rather than reducing your cover to save money, take these steps to reduce your insurance premium.