Despite a pledge to help families just about managing (JAMs), Insurance Premium Tax (IPT) is to increase from 10 to 12 per cent, it was confirmed today.
It means car, home and pet insurance is likely to become more expensive.
The tax hike is the third increase of IPT since the Summer Budget in 2015, doubling the levy in less than 18 months.
The most recent increases have already added around £25 to the cost of car cover and and almost £20 to the cost of home insurance, according to the Association of British Insurers(ABI).
Director General of the trade body Huw Evans said: “Yet another increase in Insurance Premium Tax is a hammer blow for the hard pressed. It will hit consumers and businesses alike, hurting those who buy business, motor, property, pet and health insurance.
“It marks a doubling of Insurance Premium Tax since last year and to claim a consultation on whiplash reforms which hasn’t even gone before Parliament yet will offset this just won’t cut it.”
Separately, Mr Hammond also promised to clampdown on the claims culture surrounding whiplash payouts.
Plans to cut compensation could shave around £40 off the cost of motor insurance, according to the Chancellor.
Kevin Pratt, consumer affairs expert at MoneySuperMarket, said: “As far as drivers are concerned, the Chancellor seems to be giving with one hand and taking away with the other.
If whiplash reforms can deliver £40 per policy savings and if insurers can be trusted to pass on those savings in full, that’s great news.
But the 20 per cent increase in insurance premium tax (IPT) is grim news for Britain’s households, affecting car, home and pet insurance, among others.
“It’s a crude and punitive tax at a time when we’re seeing double-digit inflation in car insurance premiums.”