From this Sunday, millions of us will see our insurance costs rise as the standard rate of tax paid each time an insurance policy is purchased increases from six per cent to 9.5 per cent. This tax - known as Insurance Premium Tax (IPT) - applies to car, contents, buildings, pet, mobile and private medical insurance (PMI) policies.
Commenting on the hike Kevin Pratt, insurance expert at MoneySuperMarket, says: "Drivers and households across the country will be hit by the 58 per cent increase to IPT. This means that, for every policy taken out on or after Sunday, the tax paid on every £100 of premium will increase from £6 to £9.50."
Policies taken out on or after Sunday will attract the IPT rise
If you’re part-way through your policy and pay by instalment, your payments after November 1 will stay the same until next renewal. It's only policies taken out on or after Sunday that will attract the new, increased rate of IPT.
What to expect
"On a £500 car insurance premium, the increase will take tax from £30 to £47.50. Home insurance premiums tend to be lower, so a £150 combined buildings and contents premium will see the tax rise from £9 to £14.50," says Kevin.
It’s not only home and car insurance policies that will be affected, however. People buying or renewing private medical insurance (PMI), mobile phone insurance and pet insurance should expect bill increases too.
How to offset the hike
For those affected, there are things that can be done to offset the tax hike. By shopping around for a new deal on renewal, you can save up to £212 on a car insurance policy and £57 on a home insurance policy, which will more than pay for the IPT hike.
"Insurers offer their best prices to new customers, simply to tempt people through the door. It therefore makes sense to become a 'new' customer every year by scouring the market for the best deal possible," says Kevin.