IPT, or Insurance Premium Tax as it’s known is essentially a tax on general insurance premiums in the United Kingdom.
UK insurance customers, once again, face further hikes in Insurance Premium Tax with the increase of the standard rate from 10% to 12%. This change came into effect on 1st June 2016 and affects all policies brought on or after this date.
But what does this mean, and will it actually affect us?
Essentially IPT is a bit like VAT but is added on the price of your personal insurances (if you want to know more details about what IPT is then please see our guide to IPT. The price you’re currently paying for your insurance policy includes this tax which goes to the government, so if this tax goes up then so will your insurance premium.
This is something that the government decides, not the insurance providers , and every insurance company in the market that provides personal insurances is affected by changes in IPT.
What is the rate of IPT tax and how has it changed?
- From 6.5% to 9.5% in November 2015
- To 10% from October 2016
- from 10% to 12% in June 2017
This means that the rate has nearly doubled in under 2 years.
The Association of British Insurers have stated that ‘Overall, the current rate of IPT at 12% could be adding an extra £283 a year to a typical household’s annual insurance bill as the rate has now doubled since November 2015. This latest hike will mean that the Government will take in £5.8 billion a year from IPT’.