Thousands of households are facing ‘hidden’ taxes costing £8 billion a year

There have been calls to cut a ‘hidden’ tax estimated to cost the public and businesses as much as £8 billion a year.

Insurance tax adds an extra 12% to most insurance policies – meaning an average of £67 is added to car insurance premiums.

This tax can rise to over £100 for households with a car when home insurance is added.

Research among 2,000 adults with insurance shows that 31% have no idea the Insurance Premium Tax (IPT) even exists, while another 36% have only a passing knowledge of it.

And half do not know exactly how much this tax will add to their policy costs.

Mervyn Skeet, general insurance director at the Association of British Insurers, which has launched a campaign calling on the chancellor to cut insurance tax, said: “It is high time we expose this tax which punishes people and businesses because them responsible.

“This tax hits the poorest hardest because they normally spend more on insurance, such as home and car insurance, as a percentage of their income.

“Such a move would not only provide relief to hardworking families and businesses, but also promote economic resilience.”

The survey also found that 49% of respondents have become more aware of how much they spend on insurance since the cost of living began.

As a result, 58% have reduced cover or switched to a cheaper provider in the past twelve months.

While 26% opted for a provider they had never heard of because they wanted to save money and 21% cut out extras they had previously included.

Now 36% are concerned that they may not have the right level of cover in the event of an emergency.

Consequently, only 6% of those surveyed via OnePoll who have taken out insurance would be against a reduction in this tax.

Nearly seven in ten (68%) believe people are being punished for being responsible and taking out insurance, while 63% believe tax on essential items should be minimal.

As a result, the Association of British Insurers’ campaign has seen Plunge Creations, the costume makers of ITV’s The Masked Singer, create Snippy, a pair of giant scissors that exposes this ‘hidden’ pre-budget tax.

Mervyn Skeet added: “Since its introduction, insurance premium tax has risen faster than the tax rate on alcohol and gambling.

“Today we are calling on the Chancellor to use next week’s Spring Budget to reduce the standard rate for insurance premiums.

“It punishes people for being responsible and a cut will help hardworking households and businesses offset rising costs and protect their families and livelihoods from sudden financial shocks.

“There has never been a better time for the government to show its support for the millions of homeowners and businesses who are doing the right thing by buying insurance.”

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