Travel insurance customers will se an increase in their holiday expenditures following the emergency budget, which was unveiled yesterday (June 22nd).
Chancellor of the exchequer George Osborne announced plans to raise the insurance premium tax (IPT) by one per cent.
The revised tax rate, applicable from January next year, would see households paying an extra £8 per year owing to the IPT being raised to six per cent, according to the Association of British Insurers (ABI).
The rate increase will also affect insurance covering homes, cars and other valuables.
Chancellor Osborne also announced that people paying higher insurance premium would experience an increase of 2.5 per cent, resulting in the IPT being raised to 20 per cent.
Malcolm Tarling, spokesperson for the ABI, said that he was not surprised by the tax increment as it had been on the government's agenda for a while and had to come into effect some time soon. However, he was "disappointed" that insurance customers would have to end up paying more money to get adequate protection for their contents and property.
Mr Tarling indicated that the increase was not likely to result in large premiums. He hoped that the additional costs would not put people off from seeking sufficient cover for their belongings.
He said: "Anything that encourages people to take out insurance is good for the economy; it's good for society because it's helping protect people against losses that they otherwise may have to put pressure on the state [to protect]."
Marc Welby, indirect taxes partner at BDO, warned that the rise in IPT could be the start of a series of rises. The move was poised to return revenue of £0.5 billion and was one of the lowest rates in the European Union, he added.
Ahead of the Budget, the AA had warned that any increase in the IPT could be detrimental as the additional expense would discourage people from taking out insurance. |
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