Insurance policies to cost families as much as £100 extra after tax increase

Insurance policies could cost families an extra £100 each year following the introduction of a new tax increase that came into force over the weekend.

The Insurance Premium Tax (IPT), which is the tax paid on each UK insurance policy, has been increased from 6% to 9.5%, which according to the Association of British Insurers (ABI) will add almost £13 to the average comprehensive motor insurance policy.

The average building and contents cover and pet insurance policies will both cost more than an extra £10, while medical insurance will be on average £40 more expensive.

The ABI anticipates that 7.3m car, 4.7m household, 3m pet and 3m medical policies will be affected.

James Dalton, director of general insurance policy at the ABI, said: "Whether you are a homeowner, driver, own a pet or buy medical insurance, millions of people across the country face being hit in the pocket by this rise in IPT.

"Whether it’s a legal requirement or you want to buy extra cover, insurance is a financial safety net, not a luxury.

"While insurance remains one of the most competitive industries in the UK, its affordability can’t be taken for granted. Further tax increases must be avoided if insurance is to remain accessible for all."