The ABI has slammed the move, describing it as a “raid on the responsible”.
It comes only eight months after it rose to 10%. The tax is payable on most general insurance policies including home, motor, pet, private medical insurance, and cash plans taken out by individuals, as well as commercial insurance taken out by businesses.
ABI bosses claimed it heaped more pressure on ‘just about managing’ families, with an estimated extra £47 added to the average annual household bill.
The rise will be felt the hardest by those paying higher premiums, including young drivers and those with private medical insurance, the ABI said.
It could be adding an extra £283 a year to a typical household’s annual insurance bill compared to November 2015, the organisation calculated.
The latest hike will mean that the Government will bring in £5.8 billion a year from IPT.
James Dalton, director of general insurance policy at the ABI, said: “With a doubling of IPT in just under two years it is time to call a halt to this raid on the responsible. This tax penalises hard working families, as well as businesses, who have done the right thing by taking out insurance to protect against many of life’s uncertainties.
“This latest hike must be the last. The next government must freeze this tax, to give hard working households and businesses a break.”
At the Autumn Statement Chancellor Philip Hammond said: “Insurance premium tax in this country is lower than in many other European countries, and half the rate of VAT.
“In order to raise revenue, which is required to fund spending commitments I am making today, it will rise from 10% currently, to 12% from next June.
“At the same time I can confirm the government’s commitment to legislate next year to end the compensation culture surrounding whiplash claims – a major area of insurance fraud – saving drivers an average of £40 on their annual premiums.”
Insurance Premium Tax Timeline produced by the ABI:
It was first introduced to the UK in 1994.
From 1 October 1994, a single rate of 2.5% was charged
· 1 April 1997: increased to 4%
· 1 July 1999: increased to 5%
· 4 January 2011: increased to 6%
· 1 November 2015: increased to 9.5%
· 1 October 2016: increased to 10%
· 1 June 2017: increased to 12%
The Government exempts the following products from IPT:
· Life insurance
· Mortgage insurance
· Insurance for spacecraft
· Commercial ships and aircraft
· International railway rolling stock
· Lifeboats and lifeboat equipment
· Goods in international transit