Autumn Budget 2018
30 October 2018
21 November 2018
With the last expected Budget delivered before the UK leaves the EU in 2019, what impact does it have on the insurance industry?
Autumn Budget 2018 is significant for several reasons. The chancellor, Philip Hammond announced that the “era of austerity is finally coming to an end”. Delivering the last expected Budget before Brexit, Hammond revealed his Budget was based on an “average-type free trade deal”. This means that in a no-deal situation there could be an emergency Budget announced in 2019. Bearing this in mind, April 2019 could see the following:
- Personal allowance raised to £12,500
- Higher rate tax threshold increased to £50,000
- National Living Wage raised to £8.21 an hour
- £20.5bn awarded to the NHS by 2024 (£2 billion of which dedicated to mental health services)
- Extra £1bn over next five years for universal credit
- Freeze on beer, cider and spirits duties
- Freeze on fuel duty
However, what did Autumn Budget 2018 have for the insurance sector? The good news for now is that Insurance Premium Tax (IPT) is not expected to increase. The past few Budgets have seen significant increases to IPT, with it increasing from 6% to 10% in 2015, and then up to 12% in 2017.
Huw Evans, Director General of the Association of British Insurers, said, "We are pleased the chancellor has done the right thing by not increasing Insurance Premium Tax. IPT already brings in more than £6bn a year for government and it would have sent out completely the wrong message to increase costs any further for people who do the right thing by buying cover to protect themselves, their properties and their families".
Critics of the previous increases have pointed out that IPT is on most insurance policies, including health. Therefore penalising those who are trying to act responsibly while saving for their future. As IPT already brings in £6bn a year, it is felt that another increase so soon would be excessive and put a considerable strain on smaller businesses who are already struggling with the rising costs.
With a deal yet to be confirmed with the EU, it remains to be seen how much of this Budget will be implemented come 2019. An extra £500m will be spent in preparation for leaving the EU, but if there is a no-deal situation it remains to be seen whether this will be enough. Insurers can breathe a sigh of relief for now but the real proof will be once Brexit is finalised.
This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.