More information is needed on a ‘stealth’ tax that costs each UK household, on average, £179 each year* and is often met by those who can least afford it.
We’re calling for better conversations around Insurance Premium Tax (IPT), following research revealing that just a quarter of consumers know what it is. With the Spring Statement announced earlier this month, IPT is often overlooked, yet it raises an estimated £4.8bn for the treasury every year* and has increased five-fold since its inception in the 1990s.
A recent survey carried out by ActiveQuote.com showed that:
- 75% of consumers do not know what IPT is and 56% admit they have no idea where IPT goes
- Once informed about IPT, consumers thought that, on average, it made up 10% of a standard insurance policy. In fact the figures is 12% or 20% for some insurance such as travel
- 57% of adults in the UK would like to see the levy spent on the NHS
- 27% would like to see it go on the state pension pot and a further 16% would like it spent on the national debt
ActiveQuote.com’s head of partnerships Rod Jones said: “To think that three out of four people in the UK have no idea they are contributing billions of pounds to the UK government in personal taxes every year is quite simply staggering.
“Against the backdrop of Brexit and the usual beer and cider taxes, IPT is one tax that goes largely unnoticed, but with every household paying, on average, £179 on this tax, it’s something we should be talking about and highlighting to consumers. It can’t remain a stealth tax simply because people may not know what this tax is, let alone its impact.
“It is also a tax that may affect consumers who can least afford it. For example, car insurance is higher for young drivers, who may have less income, while travel insurance can be higher for people with medical conditions and, as IPT is calculated as a percentage of the insurance cost, those higher premiums are increased further due to IPT.
“We want to highlight this following the Spring Statement because, the less we talk about it, the easier it is for the government to keep increasing the rate of IPT and for consumers to remain in the dark about where this £4.8bn goes.”
Introduced in 1994, IPT is a tax on general insurance premiums. There are two rates, a standard rate of 12% and a higher rate of 20%. IPT contributes more revenue to the government than beer and cider duties, wine duties and spirits duties, while, since 1994, the standard rate of IPT has increased more rapidly than tobacco duty.
OnePoll conducted a survey of 2,000 randomly selected adults in January 2019.