Insuring the house costs £50 extra after tax rise

MILLIONS of households will today see their insurance bill jump by almost £50 a year as the latest tax increase kicks in.

With family budgets already squeezed by rising inflation, premium costs are set to soar yet again, according to the Association of British Insurers (ABI).

It accused the Government of a ‘raid on the responsible’, with the rate of insurance premium tax (IPT) having doubled in less than two years. Today it rises from 10 to 12 per cent. The tax, which critics say penalises normal families, is payable on most policies, including home, motor, pet and medical insurance.

Customers now face paying higher premiums as insurance companies look to pass on the increased costs.

The latest rise could add £47 a year to the average household’s general insurance bill, based on a family with pets and a young driver, the ABI calculated.

It says a bill has soared by £283 a year since then chancellor George Osborne first increased IPT from 6 per cent to 9.5 per cent in November 2015.

With inflation at the highest level since

‘Hard-working households’

September 2013 and real wages falling, the ABI said the tax rise will ‘heap more pressure on “just about managing” families’.

Worst hit will be those already paying higher premiums, such as young and old drivers, and private medical insurance holders. A typical 19-year-old driver will see their annual premium rise by £20, while people with private medical insurance could face a jump of £39 a year.

Businesses will also be hit – with the 12 per cent rate adding an extra £300 to commercial insurance premiums.

The increase means the Treasury will rake in an extra £4billion over five years, taking the annual total to £5.8billion.

And a separate report by compare themarket.com predicts motor insurance costs are set to hit £800 next month – having risen by £100 over the last year – due to controversial changes in the way personal injury compensation is calculated.

James Dalton, Director of General Insurance Policy at the ABI, said: ‘This latest hike [in IPT] must be the last.

‘The next Government must freeze this tax, to give hard-working households and businesses a break.’