By now you can’t have failed to have noticed that a budget has taken place, and if you’re a motorist or a homeowner then the most significant thing to come out of it is quite possibly the impending changes to the Insurance Premium Tax.
Budgets can be confusing at the best of times, and once you’ve thrown in a few insurance concepts, things can become very difficult to understand. Have no fear though, as in this post we aim to make all become clear…
What is Insurance Premium Tax?
Insurance Premium Tax is essentially a tax levied by the government on a number of different types of general insurance premium; most significantly home insurance, travel insurance, and vehicle insurance.
The amount of tax that you pay on your insurance premium is calculated as a percentage of the total cost of your policy. Therefore, those with more expensive insurance premiums will also pay more insurance premium tax than those with cheaper policies.
OK, so what’s changing?
In March’s budget, Chancellor George Osborne announced that the rate of insurance premium tax will increase by 0.5%, bringing the total amount to 10%. This change will come into effect in October.
Is this really such a big change?
This increase is actually a much smaller increase than the one that previously took place in November of last year, which saw the basic rate of insurance premium tax increase from 6% to 9.5%.
The change will not affect insurance premiums which already pay the higher rate of 20% insurance premium tax, such as those relating to travel insurance and certain types of vehicle insurance.
The change in price to your insurance premiums that will happen in October is relatively small, but cumulatively with the previous increase, the 4% increase over the course of less than a year may be more noticeable, particularly on more expensive policies.
According to the Telegraph, the previous hike to 9.5% increased the average cost of household insurance bills by £73, including an increase of £13 on car insurance and £10 on pet insurance.
How can Park Insurance help me to keep my insurance costs down?
As noted earlier, Insurance Premium Tax is calculated as a percentage of your policy cost. So if your insurance premium for your car costs you £1000 a year before added tax, as of October you will be paying an additional £100 in Insurance Premium Tax.
The more expensive your vehicle insurance, or any other kind of insurance for that matter, is, the more tax you will pay on top of it. Therefore, the best way to save money on IPT is to have a lower cost premium in the first place. Some might call that a win-win situation.
At Park Insurance, we specialise in getting our customers the best possible deals on their insurance, and in doing so we also help to keep their IPT costs low. We’re able to do so because we have more than 20 years of experience and many different industry connections which enable us to get particularly competitive deals.
If you’d like to find out more or get a quote on your insurance, get in touch with us today.