Families are being hit by a “tax raid” through soaring insurance premiums which has seen HM Revenue and Customs (HMRC) rake in an extra £8billion.
The Treasury has been in receipt of a significant windfall due to an uptake in car, pet and pet insurance premiums.
HMRC figures found that insurance premium tax receipts hit a record £8.1billion in 2023/24 which is up 9.9 per cent from the year before.
In February alone, the tax authority received £1.5billion and insurance premium tax has generated more revenue for the Treasury than inheritance tax in the last year.
This levy is charged at a rate of 12 per cent on general insurance, which includes car, home, pet and health coverage.
Since 2017, the threshold for paying insurance premium tax has been frozen after being raised from a rate of 10 per cent.
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Households are getting hit by a pricey tax on insurance premiums
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However, the cost of premiums have hiked the tax take with 84 per cent of households in the UK now paying the levy, according to the Association of British Insurers (ABI).
Previously, the ABI has stated: “We’ve long said that insurance premium tax is a raid on the responsible, penalising those who are protecting themselves from financial shock.”
Recent research carried out by the trade body found that over two thirds of people either have little or no knowledge of the insurance premium tax.
Some 50 per cent of people admitted that they had little or no idea of the impact that IPT had on their insurance costs.
This is despite the fact that the levy currently adds an extra £67 to the cost of the average price paid for motor insurance.
Due to the rising cost of insurance premium, many Britons are opting to slim down their coverage which could detrimentally impact them down the line.
Around one in five insurance customers surveyed by the ABI have removed additional extras they have previously included.
Speaking to The Times, Cara Spinks, the head of insurance consultancy at OAC, referred to the levy as a “bumper tax haul” on household finances.
She explained “Many will have felt the financial squeeze when renewing policies, which is adding to the increase in IPT receipts.”
Mervyn Skeet, the ABI's director of General Insurance Policy, has called for the insurance premium tax rate to be reduced significantly to relief the pressure on working families.
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GETTY“It is high time we unmask this tax which penalises people and businesses for being responsible.
“This tax hits the poorest hardest because they typically spend more on insurance, such as home and motor cover, as a proportion of their income.
“There has never been a better time for the government to show its support to the millions of homeowners and businesses who do the right thing by buying insurance. We should cut IPT now.”
GB News has contacted HM Treasury and HMRC asking for comment.