On 1st June this year the government raised IPT from 10% to 12%. But what is IPT? And how does it affect policyholders?
What is IPT?
Insurance Premium Tax is levied on all general insurance premiums in the UK and ultimately paid by the “insured party” (i.e. the home owner, car owner, person going travelling etc), and is most akin to VAT, for which all general insurance products remain exempt.
Since its introduction in the 90’s IPT had remained at a fairly consistent level until a step change was announced by the government to come into effect in November 2015 which was the first in a series of increases which sees the tax double from 6% to 12% in under 2 years, as shown below:
- 1 April 1997 to 30 June 1999 – a standard rate of 4%
- 1 July 1999 to 3 January 2011 – a standard rate of 5%
- 4 January 2011 to 31 October 2015 – a standard rate of 6%
- 1 November 2015 to 30 September 2016 – a standard rate of 9.5%
- 1 October 2016 to 31 May 2017- a standard rate of 10%
- From 1 June 2017, the standard rate increased to 12%
Now what does this mean for policyholders?
Whether it is a new policy, a renewal, or a midterm adjustment, policy holders pay IPT. Consequently policyholders are likely to see premiums increase based on these rises.
To find out more you can visit the Government website here.