Not a day goes by without the change in the standard vat rate to 20% being mentioned in the news, yet it’s not only the rate of vat that’s set to rise in the New Year.

Air Passenger Duty has gone up to 55% but no-one has yet mentioned the rise in Insurance Premium Tax (IPT). IPT always follows the rate of VAT, so the standard rate is going from 5% to 6% and the higher rate from 17.5% to 20%.

Not good news for an already struggling travel industry as this means that the cost of travel insurance, which carries the higher rate of 20%, is set to increase by around 2.5%. Taking into consideration the rise in Air Passenger Duty and the increase in IPT, we think as a result, the cost of the average European holiday will rise by some 10%.

The higher rate of IPT also applies to electrical and domestic appliances and insurance sold with cars, while with the lower rate of IPT includes medical insurance, extended warranties and roadside assistance.

Perhaps taking a “staycation” isn’t a bad idea after all!