Insurance premium tax will hit 10 per cent within the next five years, according to the Association of Medical Insurance Intermediaries.
The standard rate of IPT is to increase from 5 per cent to 6 per cent next year, as outlined in the emergency Budget in June. The higher rate of IPT will also rise from 17.5 per cent to 20 per cent in line with the increase in VAT. IPT applies to general insurance, private medical insurance and payment protection insurance.
AMII chairman Andrew Tripp says he was surprised that Chancellor George Osborne did not propose a greater IPT hike in the June Budget but believes the Government will raise the tax over the coming years.
He says: “Over the course of the Parliament, the Government will ratchet up IPT by increments of 1 per cent per annum, so after a five-year Parliament it will get to that 10 per cent.”
The UK rate of IPT is low by European standards. In Italy, IPT is levied at 21.25 per cent, in Germany it is 19 per cent and in France the rate is 9 per cent.
Tripp adds: “For a Government that desperately needs to balance its books, IPT is a simple tax to collect.”