Insurance

The Budget 2016: Insurers warn increases in Insurance Premium Tax could leave small firms without cover

Hannah Wilkinson | 15 March 2016 | 8 years ago

insurance premium tax
The IPT was increased from six per cent to 9.5 per cent in the chancellor’s Autumn Statement 2015
SME insurance brokers have warned that small business owners could be deterred from taking out adequate insurance cover if predicted increases in Insurance Premium Tax (IPT) form part of George Osborne’s Budget.

Stuart Bennett, a director of online business insurance firm Quote Dave, warned: This is an increase in tax that small business owners can well do without. If the chancellor goes ahead with a further increase in his Budget, it will represent a classic case of mission creep.

The IPT was increased from six per cent to 9.5 per cent in the chancellor’s Autumn Statement 2015 and the BBC recently reported that it could rise further following the 16 March announcement.

the rate has gradually crept up over the last 20 years and an increase to anything approaching 12.5 per cent would be extremely punitive on hard-working business owners who already face multiple pressures running their operations, Bennett added.

The Association of British Insurers (ABI) has estimated that last year’s increase added 500m to annual insurance costs for UK firms.

David Armstrong, a director at Towergate, told Kent Online: Tax increases get people focused on cost rather than what is needed, particularly among small businesses. To cut costs, some business owners may try to work out what policies they can do without. Then, by the law of averages, within 12 months they will get a claim.

Small business groups have also been critical of the changes to tax legislation for freelancers in the public sector, which Osborne is expected to announce on 16 March.

The chancellor is set to give public sector authorities the responsibility of deciding if a contractor should be paid through their own personal service company or treated as an employee a decision which freelancers can currently make for themselves.

Osborne has argued that freelancers paid through their own companies gain an unfair advantage over employees by paying less tax and National Insurance. But the Association of Independent Professionals and the Self Employed (IPSE) has warned the policy change will deter freelancers from working in the sector.

?Chief executive Chris Bryce said: People who run their business through personal service companies may decide they no longer want to take public sector contracts, and this means government departments will miss out on freelancers? expertise hitting the public sector’s ability to deliver vital projects, such as HS2 and Crossrail, in a timely and cost-effective way.

this move is entirely against the government’s declarations that it supports entrepreneurs and is working to reduce red tape.The chancellor should reconsider making this announcement.

If you’re struggling to make sense of insurance small print, never fear this guide explains everything.

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