Posted on: 28 October 2015
When the summer budget was announced in July this year, you may remember hearing about the increase to the standard rate of Insurance Premium Tax (IPT) effective 1st November 2015. But, once George Osbourne left the TV screen, did you give it any more thought? The IPT rate impacts all household and business insurance (unless exempt) and the increase means that insurance is more expensive for everyone as a result.
What is IPT?
IPT is a tax charged on general insurance premiums including building, contents and motor insurance.
There are two rates of IPT:
- A standard rate of 6% (currently)
- A higher rate of 20% for travel insurance, mechanical and electrical appliances and life insurance
The IPT rate is determined by the government and therefore the same rate applies to specific types of insurance bought through all UK insurers. It’s usually automatically added by the insurer to your insurance premium quote.
IPT is going up…
The standard rate, previously 6%, is rising to the new 9.5% rate as of 1st November 2015.
Why are these changes being made?
The government’s policy objective is to increase revenue with Insurance Premium Tax. The House of Commons Briefing Paper on Insurance Premium Tax forecasts that the tax policy measure announced in the Budget is set to raise £5.1bn by 2017/18, rising to £6.5bn by 2020/21.
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