Travel insurance: Tax warning

The number of people taking out travel insurance could be hit by a New Year rise in tax paid on premiums, it has been claimed.

Insurance premium tax (IPT) for travel insurance rose from 17.5 to 20 per cent last week, mirroring the increase in VAT. The rate hike affects all single trip or multi-trip policies starting or renewing on or after 4 January, whether bought individually or through an employer.

Peter Hayman, director at PJ Hayman & Company, claimed the increase would "deter" holidaymakers from buying travel insurance.

"The government will be collecting a 20 per cent tax on all travel insurance premiums." Hayman added that those most affected will be "people who have to pay higher premiums due to age, ill health or decide to take a gap year".