"Insurance premium tax in this country is lower than in many other European countries, and half the rate of VAT."
The standard rate of insurance premium tax, which applies to most general insurance policies purchased in the UK, rose to 10% in October after being increased by the previous Chancellor George Osborne in the Budget earlier this year.
This follows a previous rise from 6% to 9.5% which came into effect at the beginning of November last year, meaning the tax itself has risen by more than 66% in less than a year.
Philip Hammond said: "Insurance premium tax in this country is lower than in many other European countries, and half the rate of VAT.
"In order to raise revenue, which is required to fund spending commitments I am making today, it will rise from 10% currently, to 12% from next June."
However BIBA hit back at the plans, stating: "Over the past 15 months, policyholders have already seen an increase of 66% in the Insurance Premium Tax they pay – this further increase to 12% in this regressive tax is outrageous and is a tax on protection which will hit everyone and especially those ‘just about managing’.
"We believe that this increase is contrary to the stated policy of HM Revenue and Customs “that IPT should make the required contribution to HM Government revenue while minimising the effect on the take up of insurance.
"This increase comes at a time when both motor and home insurance premiums are rising and our fear is that many of those who most need it will avoid taking up insurance and be unable to afford the protection they need."
