Isles MP Alistair Carmichael has written to Chancellor of the Exchequer George Osborne, urging him not to implement a reported three per cent rise in Insurance Premium Tax.
Mr Carmichael says the “sneaky” hike would hit the pockets of millions of families including those in his constituency.
Reports had suggested that the Chancellor could announce a rise to 12.5 per cent in that particular tax in next week’s Budget, Mr Carmichael said.
The Tories, now free of the coalition with the Liberal Democrats which Mr Carmichael was previously a part of, pushed the tax up by 3.5 per cent to 9.5 per cent. If the rate was to increase to 12.5 per cent, the tax would have gone up by 108 per cent in just six months.
Mr Carmichael said Insurance Premium Tax (IPT) already hit millions of people doing what was legally required of them by taking out car insurance, but is also affected at least 50 million car, home, pet and private medical insurance policies.
He said: “I have written to the Chancellor telling him to refrain from this unnecessary and underhand tax hike.
“It probably would not make the biggest headlines from the Budget but the addition of an extra £100 to the annual cost of insurance for millions of people would be very unwelcome.
“Car insurance is a legal requirement and not the only insurance policy people have. An increase would affect breakdown cover, home, pet and private medical insurance policies. There is unlikely to be a family in the UK unaffected by this.
“A tax rise on car insurance would adversely affect younger and older people with higher premiums. In rural communities like Orkney and Shetland, having a car is a virtual necessity.
“The coalition government did all it could to support motorists in the Highlands and Islands with pump prices, but with media reports this week suggesting a possible fuel duty rise and this IPT increase, it is fair to say that any goodwill the last government had with local motorists would surely evaporate after the Budget.”