The tax is added to over 50 million general insurance policies each year, including those for cars, homes and private medical cover.
Announcing the extra 2% increase, the chancellor, Philip Hammond, said IPT rates in the UK remained some of the lowest in Europe and that money was needed to pay for the government’s infrastructure plans.
From the 1st of June, those looking to buy insurance will have the higher 12% rate added to their premium.
Since IPT was introduced in 1994, successive chancellors have steadily increased the amount charged. IPT has recently been raised three times in the space of 18 months.
Car drivers appear to be most likely to feel the worst of the tax hike. The increase will add &10 to the average car insurance premium, according to the AA.
The AA said the chancellor had created the illusion of being the motorists’ friend with a freeze on fuel duty, while “pickpocketing drivers” on IPT. Its president, Edmund King, predicted that the extra levy would only add to the 1m uninsured cars on UK roads.
“In 18 months, tax on insurance will have doubled - no other tax has increased by that much,” he said.
IPT was introduced in 1994 to raise revenue from the insurance sector, an area that was viewed as being under-taxed.
Those who oppose the tax, say it is regressive because it is applied to individual policies. This means people who have higher insurance costs pay a disproportionately high rate of tax.
The AA claims that those paying the highest premiums - Residents of London and Young Drivers - will receive the highest IPT.
Gareth Shaw from Which, says there are a number of options young people can take to keep their premiums down.
"One thing you might want to consider is something called black box insurance, also known as telematics”.
"Your insurance company will install a little tracker in your car and it will monitor your driving performance.”
"Insurers tend to think younger people are more risky drivers.”
"If you keep within the speed limit, you don't drive at night and you take corners well, it will reward you as a safer driver with lower premiums."
He also says that you could add a parent to your policy to keep the cost down.
"And another thing is to perhaps add a named driver.”
"That could decrease your premiums, but it's really important you don't add them as the main driver as that's considered fraudulent by insurers.”
"The other thing worth looking at is taking an advanced driving course, known as the pass plus.”
"Some insurers out there will reward you for going ahead and taking the course, so it's something you should consider."
If you require any more information on IPT, or you are looking for an affordable insurance policy, get in touch with West Craven.