Government are reaping an extra £103M per year from Holidaymakers via a stealth tax on travel insurance

The UK pays more tax on travel insurance than the rest of Europe

With the statement from The TaxPayers' Alliance this week alerting UK holiday makers to the fact that they are paying £2b in “holiday taxes”, is concerned that UK holiday makers are being taxed ridiculous amounts, and via taxes that are out of date. Essential Travel is calling for an end to this unfair system, where UK travellers are paying more for their travel insurance than most other european countries.

What is IPT?

Every travel insurance premium includes insurance premium tax (IPT), adding 20% to the cost of the insurance. Travel businesses are forced to pass this cost directly on to consumers Most Insurance policies such as car insurance, are taxed, but at lower levels (typically 6%) and other European countries typically pay a significantly smaller amount of IPT on travel insurance:

Country IPT Rate

Austria 11%

Belgium 0%

France 9%

Greece 10%

Sweden 0%

UK 20%

Why is Travel Insurance IPT out dated?

Travel insurance in the UK is subject to these higher rates for historical reasons which are no longer relevant. It was originally created to stop travel companies selling cheap package holidays but adding on expensive travel insurance policies (which weren’t at the time liable for tax). Now, as a result the government is collecting an £103m a year. Essential Travel argues that this higher rate should be removed from insurance policies, and promises it will pass on savings to the consumer if this happens.

What affect does this have on the consumer?

The Foreign & Commonwealth Office (FCO) strongly recommends all British holidaymakers to purchase appropriate travel insurance, Essential Travel are concerned that the high level of IPT may prevent some holiday makers from investing in protection whilst abroad.

Excessive insurance charges caused by hidden taxes discourage holidaymakers from buying travel insurance, which flies in the face of policy advocated by the Foreign Office. These stealth taxes seem to demonstrate a government which is not joined up, and is happy to put its citizens at risk” warns Stuart Bensusan, spokesperson for

The other fear is these taxes present an excuse for the government to fill a sizeable budget deficit. There is immense value derived to the UK economy from travel, and a more equitable tax regime needs to be established." continues Bensusan.”

Continued taxation across the sector will inflict high prices to consumers and potential economic damage to the industry and the UK economy.”

Bensusan concludes; “It is hard to understand why the government would risk damaging such an important part of the economy in such unprecedented hard economic times. I would like to ask the government what they intend to do about this?

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