Osborne increases insurance premium tax

Chancellor George Osbourne has announced that insurance premium tax is to rise in today's emergency Budget.

He told Parliament that IPT will rise from 5% to 6% while the higher rate of 17.5% will increase to 20%, from January 4, 2011.

The government said it expects to raise £0.5bn per year from 2014/15 as a result.

Osborne’s announcement follows widespread speculation that he would use this year's Budget to announce a big hike in the main rate of the tax. Each point on the main rate of IPT raises approximately £400m per annum.

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Elsewhere, VAT is rising from 17.5% to 20% and capital gains tax is up 10% for higher rate tax payers.