Insurance Premium Tax (IPT) set to increase to 12%
18th February 2020
The HM Treasury reported in the Autumn Statement 2016 that the standard rate of Insurance Premium Tax (IPT), the tax on general insurance, will increase from 10 per cent to 12 per cent with effect from 1st June 2017.
This increase means the IPT will have doubled in under two years, as it was 6 per cent in October 2015. When this latest increase was announced, the Association of British Insurers called it a ‘hammer blow for the hard-pressed’, and the Automobile Association (AA) warned that it will add about £10 per year to the average car insurance premium.
The new rate of IPT will be due from 1 June 2017 on insurance premiums received on or after 1 June 2017 which relate to risks for which the period of cover under the terms of an insurance contract begins on or after that date.
Here is a summary of how the increase in insurance tax will affect you going forwards:
**Policies with a start date before 1st June 2017**
* New business and renewals effective from before 1st June 2017 will attract IPT at 10%
* Mid Term Adjustments up until (and including) 31st May 2017 will attract IPT at 10%
* Mid Term Adjustments on 1st June 2017 or after will attract the new rate of IPT at 12%
**Policies with a start date after 1st June 2017**
* New business and renewals effective on or after 1st June 2017 are taxed at the new rate of 12%
* Any Mid Terms Adjustments are taxed at the new rate of 12%
Return premiums on any transaction (cancellation or mid-term adjustment) will always generate the same rate of IPT as was charged when the original premium was debited.