In the last budget, the Chancellor of the Exchequer announced that there was to be an increase in the standard rate of insurance premium tax and, if you were not aware, this applies to car insurance premiums as well as certain other types of insurance. Quite simply, this means that your car insurance premiums could shortly increase.
At the moment, you will probably be paying an extra 6% for your car insurance with this being the amount of insurance premium tax that is payable to the Government. If, for instance, your car insurance is £500 per annum then you will be paying an extra £30 per annum in insurance premium tax making a total of £530.
From the 1st November 2015, this tax is being increased by 3.5% to 9.5% on new policies or policies being renewed – a sizable sum. In fact, this would mean that, in the above example, your premium would rise to £547.50 per annum – an increase of £17.50 per annum. There is a transitional period between 1st November 2015 and the 29th February 2016 for those insurance companies that run a special accounting system. From the 1st March all policies will be subject to the increased insurance premium tax.
It will be interesting to see if any insurance companies amend their premium rates to benefit the policyholder i.e. using the above example, would an insurer reduce what the customer pays each month so that they are not having to find an extra £17.50 per annum? With so much competition between insurance companies we can but hope that some take this action.
For your part, it could pay you to make enquiries with other car insurance providers to see if you can get a lower premium when your policy comes up for renewal. Using a price comparison website that specialises in the likes of car insurance is one way of doing this.