Tax on insurance policies and premiums.

fiftydd

Stay with me on this as it will become clear.
Cast your mind back to the days when, you went into a bookmakers and you paid tax on either the initial bet or the winnings. Then the government disposed of the tax because it was deemed to be taxing your income twice. That's why lottery winning and the like are now tax free.
Now, you take out an insurance policy with XYZ for ABC. The premiums for that policy are taxable, even though you've already paid tax on the earnings of those monies which pay the premiums.
Isn't the insurance that you have taken out, a gamble? The insurance company is gambling that you will loose the bet and they won't have to pay out. You are gambling that you will win the bet and they will have to pay out. (Irrespective whether or not they will find a loophole not to pay out). It's a gamble on both sides. It's a bet and the betting slip is the policy. Further to this, if the insurance does pay out, the tax paid on the premium is not justified as there are no dividends because it isn't an investment. There is no financial gain because you have paid the premium, like saving for a rainy day without any banking interest being paid. It's the results of a gamble. If the policy does not pay out, you have lost the bet and there is no payout and so the tax has been paid for nothing. There is no financial gain. This is the same with all insurance policies, whether it is car insurance, home/contents insurance, life insurance, holiday insurance etc.
When Gordon Brown was the Chancellor of the Exchequer, he brought in the tax on insurance premiums and he was warned at the time by his advisers that he was on shaky ground and to think twice about it.. No one bothered about it, they just paid the tax, so he, (the government) got away with it. Now the government are going to increase the tax on the premiums paid. Do people not think that it should be investigated?

rs65

Who exactly warned Gordon Brown about it and why? I'd like to see a reference for that. It was the 1993 budget.

stugib

Well that needs a whole load of subjective analogies and logical fallacies to make any sort of sense.

HappyHarry

Cast your mind back to the days when, you went into a bookmakers and you paid tax on either the initial bet or the winnings. Then the government disposed of the tax because it was deemed to be taxing your income twice. That's why lottery winning and the like are now tax free.

I'm fairly sure the reason tax was taken off at bookmakers was so as to boost the profits the gambling industry made, and the gambling industry now pays a 15% tax surcharge on gross profits instead. The bookmakers have just adjusted the odds a little to ensure they can afford to pay this.

There are many instances where your income is taxed twice. VAT is a prime example.

Do people not think that it should be investigated?

Not me. I can't think that investigating a government raising a tax would be a useful use of resources.

If you are not happy, you could always vote for someone else in the next election?

David_InsDef

fiftydd wrote: »

Stay with me on this as it will become clear.

I'm still waiting on the clarity.... That said, I'm also worried you'll take that as encouragement to keep going.

chris_m

Personally, I take a gamble that I will lose the bet and they won't need to pay out, nor me suffer the inconvenience of having to claim and wait for whatever the insured item was to be replaced - with the reassurance that if I was wrong it will be replaced.

Still, back to the tax - if the revenue required isn't met by charging insurance tax, you can rest assured that it'll be raised by some other means so you'll still end up paying it somehow.

Quentin

fiftydd wrote: »

..... Now the government are going to increase the tax on the premiums paid......

Where have you seen this?


It looks like you have a scoop as the next budget increases haven't been announced??

fiftydd

It was on the news yesterday. And don't say don't believe everything on the news. If you have read the post correctly, I did say Browns advisors at the time. You have been warned.

SueMaggie

Insurance Premium Tax was introduced by Kenneth Clarke in the budget in November 1993 and was first levied from October 1994 - so not sure what Gordon Brown has to do with that particular tax.

He did abolish the tax on betting paid by punters but it wasn't to do with people being taxed twice, it was to try and keep the betting industry strong in the UK (as bookmakers based overseas didn't have the tax and were getting increased amounts of revenue from the UK).

pinkteapot

fiftydd wrote: »

Cast your mind back to the days when, you went into a bookmakers and you paid tax on either the initial bet or the winnings. Then the government disposed of the tax because it was deemed to be taxing your income twice. That's why lottery winning and the like are now tax free.

That wasn't the reason.

Almost every tax in the land (except income tax) is taxing your already-taxed money. If the government had to get rid of all taxes on things you buy from your net income, it would be the end of VAT, alcohol duty, petrol duty, stamp duty, inheritance tax...

Which sounds pretty great to me, but it ain't happening. :rotfl:

Lottery winnings are tax-free because they're money you get but HMRC don't define them as "income".

As others have said, the tax on betting was abolished to prop up the gambling industry:
http://www.dailymail.co.uk/sport/article-28835/Betting-tax-abolished.html

With insurance you're paying for a service. Just be grateful that IPT (insurance premium tax) is only 5%.

Quentin

pinkteapot wrote: »

Just be grateful that IPT (insurance premium tax) is only 5%....

Well ........9.5% actually