Insurance premium tax (IPT) is costing British households an average of £233 a year, accordin to a report by the independent Social Market Foundation.
This is up from just £87 per year in 2009/10.
The report shows the lowest income families are being hit hardest – they spend 4.1% of their post-tax income on insurance, compared to 1.6% for the highest income households.
In 2017/18, the 12% standard rate of IPT cost the poorest 50% of households an extra half a billion pounds in extra spending than if the rate had stayed at 5%.
The report shows businesses are also losing out. Unlike VAT, businesses cannot claim back IPT so a higher rate of IPT translates in to lower net profits for businesses and, in turn, lower incomes and dividend payments for households.
Around half of what households spend on IPT is what businesses pass on to the consumer.
The regional breakdown of spending on IPT shows the North West is being hit particularly hard because income in the North West is lower.
Huw Evans, director general of the Association of British Insurers, argued that the report shows how regressive and unfair IPT is.
“IPT costs hard-working families £223 a year, just for doing the right thing and buying insurance to protect themselves. Businesses and public bodies are also losing out as this tax damages their bottom lines. We urge the government to cut this stealth tax in the March budget,” he said.