The Autumn Statement saw Chancellor Phillip Hammond announce a rise in insurance premium tax (IPT), meaning the rate will increase to 12% from June 2017.
This is the third increase to the rate of IPT announced in less than two years. It affects general insurance policies including private medical insurance but not protection policies which are exempt from IPT.
Hammond (pictured) said: "Insurance premium tax in this country is lower than many other European countries and half the rate of VAT. In order to raise revenue, it will rise from 10% currently to 12% next June."
The rate of IPT increased from 6% to 9.5% on 1 November 2015 and was announced in the 2015 Summer Budget by previous chancellor George Osborn.
In the March 2016 Budget, the rate was then further increased to 10%, a softer increase than the rumoured 12.5% at the time.
Insurer and intermediary reaction
Speaking at the AMII summit, chairman Stuart Scullion urged the PMI industry to "lobby hard" against the move.
Meanwhile, Bupa said the latest increase made "no sense" and warned that the move would punish those who sought to protect their health.
Romana Abdin, Chief Executive of Simplyhealth said:"The Chancellor talked today of targeted tax cuts but on IPT he has used the bluntest of instruments to raise revenue. IPT acts as a stealth tax on people who take out health insurance - they get taxed twice for doing the right thing in looking after their own health needs.
"By continuously increasing IPT the government will ultimately push people back onto the NHS for health services. Health insurance products need to be exempt from IPT - if not we are constantly putting more strain on the NHS, which in an increasingly ageing society, is already under immense pressure."
In a statement, the BIBA said: "Over the past 15 months, policyholders have already seen an increase of 66% in the Insurance Premium Tax (IPT) they pay - this further increase to 12% in this regressive tax is outrageous and is a tax on protection which will hit everyone and especially those ‘just about managing'.
"We believe that this increase is contrary to the stated policy of HM Revenue and Customs "that IPT should make the required contribution to HM Government revenue while minimising the effect on the take up of insurance".
The ABI warned last week that further increases to IPT could potentially add a further £52.50 to the cost of the average private medical insurance policy. The trade body had called on further freezes to IPT, criticising it as a "raid on the responsible."
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