Insurance Premium Tax (IPT) increases to 12% today
Announced in last year’s Autumn Statement, Britain’s Insurance Premium Tax (IPT) will be charged at the new rate on policies taken out or renewed from 1st June 2017 onwards.
This will represent the third increase in IPT in less than two years. In July 2015 it increased to 9.5%, and in March 2016 it increased to 10%.
First introduced in 1994, IPT is a tax on general insurance premiums such as home insurance, car insurance and travel insurance.
Insurance executives have criticised these tax rises, as they have contributed to a sharp increase in motor insurance premiums. It has been reported that car insurance premiums have seen an 8% increase in the past six months.
Vehicle owners and small businesses are predicted to be hardest hit by the 2% rise in IPT. However, the government insists that when offset with a crackdown on whiplash claims and a freeze in fuel duty, drivers may see a decrease in their motoring outgoings.
When will the change affect me?
Policies arranged after 1st June Unlike previous increases, there will be no concessionary period, meaning new policies and renewals arranged after the 1st June will automatically come with the higher 12% rate. The rate will also apply to any mid-term adjustments which result in a higher premium – this may be pertinent to businesses which have seen a change in circumstances, such as an expansion or relocation.
Policies arranged before 1st June However, the new rate won’t apply to policies arranged or renewed before the 1st June. Any cancellations or mid-term adjustments which result in a refunded premium will also follow the same rate as that which the policy was arranged with – so 10% if it was purchased before 1st June.
If you’re unsure as to what level of IPT will apply to your policy and when you will be affected, speak to Paul Ayrton at Redwood – email@example.com who will be happy to help.