Homeowners, drivers and pet lovers will likely pay more on insurance from 1 June 2017. This is because Insurance Premium Tax (IPT) will increase by 2%.
The IPT basic rate will increase from 10% to 12%. This means the rate of tax paid on certain insurance policies has doubled in less than two years, up from 6% in 2015.
To make sure you know what this means for you, we're taking you through what's changing and how you can reduce your premiums.
IPT is a tax on general insurance premiums introduced in 1994. These include buildings, contents, car, pet, mobile and private medical insurance.
This form of tax doesn't apply to all forms of insurance. Some policies like travel insurance and electrical appliances insurance fall under the higher rate of IPT. This rate remains at 20% and isn't changing.
Insurers usually add the cost of IPT to the price of most quotes, so you've probably never noticed it before.
What does this mean for me?
From 1 June 2017, the price of certain insurance premiums are likely to rise. This is because insurers could pass on some of the cost of IPT to their customers.
The Association of British Insurers predicts this latest rise could add an extra £47 to the average household's annual general insurance bill, based on a family with pets and a young driver.
In particular, you could see a jump in the price of your car insurance when it comes time to renew. One report predicts that car insurance premiums are set to rise to £800 this June.
How can I reduce my premiums?
While you can't do much to stop the price hike, you can do certain things to get a better deal on your insurance.
Shop around – Use price comparison sites to compare insurance premiums to make sure you're getting the cheapest deal. These sites can be helpful for comparing policies directly with each other but you should get quotes from standalone companies as well.
Increase your excess – You could lower your monthly premiums by deciding to voluntarily increase your excess. Think hard about this, as you don't want to make the excess so high that you'd struggle to make a claim at all. Find out if you should increase the excess on your car insurance here.
Add a named driver – If you're a relatively new driver, you could lower your car insurance premiums by adding a more experienced driver to your policy. Just make sure you don't put them down as the main driver if you're going to be driving the car, otherwise you could be committing an illegal act called fronting.
Is your car insurance up for renewal soon? Find out how to reduce the cost of your car insurance in our blog.