CII urges Sunak to reform insurance premium tax in UK Budget
The Chartered Insurance Institute (CII) has asked new chancellor Rishi Sunak to reform insurance premium tax (IPT) in his first Budget and also reform protection policy charges.
“The insurance profession has been consistent with its stance on insurance premium tax (IPT),” said the CII. “While the tax may have once been seen as a necessary component of HM Treasury’s tax strategy, the rate has unreasonably risen over time from 2.5 percent to 12 percent since it was introduced in 2015, increasing the true cost of insurance and hitting hard working people the hardest.”
Keith Richards, managing director of engagement for the Chartered Insurance Institute, said: “This stealth tax on responsible and vulnerable customers should be cut. We are asking the government to consider the benefits for consumers of reducing the cost of premiums by cutting this tax, and the knock-on positive effect this will have across the country in making insurance more affordable for people to protect against the risks in life which may otherwise be catastrophic.”
To expand access to protection products, particularly for those with disabilities and long-term illnesses, the Chartered Insurance Institute and Personal Finance Society have also called on the Government to better enhance workplace protection schemes.
The CII asked that all pure protection life assurance policies, that is, those which can only pay a claim on death or disability and which have no cash value otherwise, are exempted from entry, periodic and exit charges applied to discretionary trusts under the discretionary trust tax rules (contained in IHTA 1984).
Richards said: “These charges appear to have been introduced to curtail the inappropriate use of trusts as a vehicle for investments. However, the unintended cost of administration exceeds the potential revenue generated and presents a burden to individuals asked, often as a friend or family member, to ensure the proceeds are paid promptly on death. At a time when survivors can be financially and emotionally vulnerable, it serves only to punish them at their lowest, and must change.”
