LONDON: Britain will raise insurance premium tax by two percentage points to 12 percent from June 2017, finance minister Philip Hammond said in his budget statement on Wednesday, the third increase in less than two years.
The latest rise in the tax rate on home and motor insurance premiums represents a doubling in the rate compared with less than two years ago. The taxes are usually passed directly to policyholders.
Insurance executives have criticised the tax rises, which contributed to a sharp rise in motor insurance premiums in recent quarters.
However, the government will bring forward legislation to cut the "unacceptably high" number of whiplash claims on motor insurance policies, the finance ministry said in a statement, adding that would cut annual motor premiums in England and Wales by around 40 pounds ($50).
"This is a classic case of the government giving with one hand, in the form of whiplash reforms, and taking with another," insurer AXA UK said in a statement.
"The affordability of insurance is being fundamentally threatened. The country is already underinsured and ever rising insurance taxation could have the unintended consequence of making this situation even worse."
Shares in motor insurers Admiral and Direct Line were down around 1 percent at 1352 GMT, underperforming the FTSE 100 index.
For more news on Britain's budget statement.
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