What is Insurance Premium Tax (IPT)?
IPT is a tax imposed by HMRC on general (both personal and commercial) insurance premiums.
There are currently two rates of IPT. The first of these is a standard rate of 9.5% which applies to general insurances (such as motor, buildings and contents and commercial insurances). A higher rate of 20% currently exists for specific insurances such as travel insurance and mechanical / electrical appliances insurance.
What has changed?
The UK Government announced on 16 March 2016 that from 1 October 2016 the standard rate at which IPT is charged will increase from 9.5% to 10%. This follow’s last year’s increase from 6% to 9.5%.
The increase will affect all households and businesses in the United Kingdom not currently exempt from IPT.
What does this mean for your personal insurance and / or your business insurance?
If you have a policy with an inception or renewal date on or after 1st October 2015, the increased 10% rate of IPT will apply to your policy. This rate will also apply to mid-term adjustments made on or after this date. Return premiums will always attract the rate of IPT applicable to the original premium that the return premium reduces.