Millions of businesses will be hit by the government’s rise in Insurance Premium Tax (IPT) this month. It’s being increased by 58 per cent from 1st November from 6 per cent to 9.5 per cent. The move, announced by the chancellor George Osbourne in his summer budget, will apply to all general insurance products apart from travel insurance, which already comes with a 20 per cent tax on premiums.
Businesses will be affected alongside individuals, as the increase will apply equally to corporate insurance premiums pushing up running costs for many small and medium-sized enterprises. Vehicle, property, building and employee insurance will all be raised. Commercial and landlord insurance will be included in the hike as will professional indemnity and public liability insurance, all products which are essential to most businesses.
A standard shop will need at least four types of insurance. With an increase in tax on each policy, many will see a drop in cash flow, the businesses well-being and perhaps a cut in staff. Whilst this will smart a little the more painful damage will be to high-risk industries such as engineers, who inevitably pay higher premiums.
There may be further increases to other things such as; administration fees for processes like name or address changing on a policy. However uSwitch recommends that people with nearly expired policies should not renew with their current insurers. They have suggested looking elsewhere.
uSwitch also advises that if a policy is due for a renewal in the first twelve days of November then it might be more beneficial to cancel it and take up a new policy on October 31st *
*You will need to consider the extra charges for cancelling and the probability of not getting your money back for the days remaining.
uSwitch insurance expert Rob Jones has commented on the new hike by saying “It’s important that you look at your policy carefully to see how long is left and if you’ll face any exit fees before deciding to cancel – as well as ensuring you’re not double covered.”
Head of Businesscomparison.com Philip Brennan has this advice,
“Make sure you shop around for the best deals on business insurance. Never has it been more important to compare quotes. The last time insurance premium tax was increased was back in January 2011 from 5 per cent to 6 per cent so business leaders should not be complacent about these costs that are crucial to the safe and secure running of a business. They should be mindful that insurance costs can stack up, particularly when increased as they will be for new policies from November this year.”
The new rate will be due on the premiums classified by the legalisation, unless the insurer has used a ‘special’ accounting scheme. In this recent case the new rate will only apply to the premiums relating to any risks enclosed by the terms of a contract enrolled after the 1st of November. March 2016 will see that the new standard rate will apply to all premiums, regardless of when the contract was submitted.
If you are tempted to switch but aren’t sure where to go, visit: Businesscomparison.com to see the best business insurance deals.