List Of Taxes On Van Insurance

Believe it or not, we pay tax on our home, car and van insurance. We don’t really see the tax because it’s calculated into the insurance premiums that we pay, however these taxes can actually the drive the cost of our premiums up.

That’s exactly what happened at the start of 2011 when Chancellor George Osborn presented his financial review and subsequent spending plans; he increased standard value added tax (VAT) from 17.5% to 20%. This means that consumers have to pay 20% of the value of the goods, which is applied to the total cost. This money then goes straight to the government to put back into the economy.

When VAT and other taxes rise, the shops have to increase the cost of their products and services to cover the extra percentage (2.5% in the case of the recent VAT rise) that has been lost to the government. This is partly why the value of goods rise year on year, and one thing that is significantly affected is van insurance. This type of insurance is exactly like car insurance and home insurance – it is there to protect the insurer from any theft, damage or injury, depending on the level of cover they have.

Unfortunately this type of insurance isn’t exempt from taxation either. However, some vehicle insurance is actually exempt from VAT, that’s because it is covered within Insurance Premium Tax (IPT)

IPT was introduced in 1994 as a tax on general insurance premiums. Back then the rate of IPT started at 2.5% and since then it has risen steadily. Going back to George Osborn’s spending review, he decided in January of 2011 to increase the rate of IPT applicable to general insurance policies from 5% to 6%.

Whilst the jump is significant, it is by no means the end of the world. The reasons are twofold; one, IPT on general insurance is paid instead of VAT. Now considering VAT is at 20% and IPT is at 6%, it could be a lot worse. Secondly, IPT is actually split into two rates and whilst the standard rate grew from 5% to 6% in January, the higher rate of 17.5% also rose, to a whopping 20%.

The higher rate IPT is applicable to insurance for luxury goods, so that’s holiday’s, some vehicle insurance such as classic cars and rental cars, and finally higher rate IPT is applicable to white/electrical goods. Fortunately for the consumer of van insurance, the tax rate that is applicable is the standard 6% as opposed to the 20%.

In any case, the rise of IPT had left consumers worried about the knock on effects this may have on their insurance premiums. As mentioned, it isn’t something that you would exactly notice having to pay, as the insurance companies themselves have to pay the tax to the government. However, for some insurance companies, a rise in tax means rising premiums to cover the associated costs.

This isn’t strictly true for some insurance providers as they manage to cut associated costs and drive more custom through cheaper premiums. However it is really up to the consumer to research and establish which the best premium for their van insurance is. This can be done by contacting the insurance provider direct or using comparison sites or intermediary sites. Both have their advantages, with intermediaries offering great insurance deals and take the boredom away from multiple form filling.

To recap then, there are multiple taxes when it comes to paying insurance. However for standard van insurance, you will generally only have to pay IPT of 6%. Whilst we are living in times of austerity, you can still find a relatively inexpensive insurance premium by searing through intermediary websites – this way you’ll get the best value for your van insurance.

By: Vincent A Rogers

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Vincent Rogers is a freelance writer who writes for a number of UK businesses. For the best Cheap Van Insurance he recommends BUDGET Van Insurance.