The UK government is being urged to lower its “staggering” Insurance Premium Tax (IPT), which has doubled since 2015 to 12%, in this month’s budget.

The first budget of Boris Johnson's majority Conservative government is due to be delivered by newly-appointed Chancellor Rishi Sunak on Wednesday.

The IPT is “regressive and unfair” and burdens hard-working families “just for doing the right thing and buying insurance to protect themselves,” Huw Evans, Director General of the Association of British Insurers (ABI), said.

Households are losing £223 ($432.47) a year on the “stealth” tax, with lowest income families hit hardest via a 4.1% spend of their post-tax income on insurance. Businesses and public bodies are also losing out as this tax damages their bottom lines, ABI says.

The tax generates £6.2 billion ($12.02 billion) a year, an amount the British Insurance Brokers’ Association (BIBA) says is “staggering.” BIBA demands the rate of IPT remains frozen for the duration of this parliament and wants the new Chancellor to grant relief for both telematics-based policies and cyber insurance.

“The resultant uptake in insurance would improve road safety and build business resilience, reducing the burden on the state,” BIBA says, warning that businesses and households may elect to go unprotected if the tax increases.

BIBA is most concerned about young drivers who already face high risk-based pricing and therefore a large tax burden. Take up among smaller businesses of suitable cyber insurance is also low.

Tulsi Naidu, CEO at Zurich, says an increase in IPT results in a string of unintended consequences, affecting charities, public authorities, businesses and individuals, and disproportionately hitting those with higher insurance risks.