Insurance Premium Tax (IPT) increased on 1 June 2017 from 10% to 12%. This shows IPT has doubled in just a few years as Chancellors use it as an easy way to raise funds for the Treasury.
The rise will affect more than 50 million businesses, charities and individuals according to the Association of British Insurers (ABI) and is expected to add £13billion to government funds over the next five years.
As specialist insurance brokers for healthcare providers, we always aim to keep you informed about changes to insurance policy that will affect you.
How will the IPT increase affect your insurance policies?
Which insurances are affected by the IPT rise?
All classes of general insurance will be affected by the IPT rise so this includes:
Travel insurance, mechanical and electrical appliances insurance and some vehicle insurance will not be affected, although they have a higher IPT of 20% already, which will remain.
It is estimated by researchers that this change will add £47 to the insurance costs of an average family over a year.
A percentage based tax like IPT, usually affects the people with the most expensive policies, often for unusual circumstances, such as young drivers with high value cars or property owners living in high-risk flood zones.
Practical points about the new IPT
The IPT increase commenced on 1 June 2017, meaning all new insurance policies will be subject to the higher rate of 12% IPT when taken out on, or after, this date.
When existing policies require an amendment, or a refund applies to a policy that was taken out prior to June 2017, the old rate of IPT will apply.
If you are paying your insurance premiums in instalments, to spread the cost through the year, then the rate of 10% will be honoured, as long as the instalment is processed before 1 June 2018, after which the 12% will apply.
Any risks that were in place prior to 1 June 2017, that require additional premiums may only be subject to the 10% IPT, with a cut off date of 1 June 2018. New risks, however, that are added to an existing policy after 1 June 2017 are likely to incur the 12% new rate of IPT.
Seek low premiums from reputable insurance companies
IPT is actually a tax for insurers, not consumers. It is technically the decision of the insurance company as to whether they pass on the tax increase to customers.
Many of course will, although insurance remains competitive in the marketplace so will continue to win new business by offering low-cost options and deals for switching.
The important thing is to shop around for the best insurance policy for you, whether it’s for your home, car, health or pet, or in relation to your Public Indemnity Insurance.
Working with an independent insurance broker can help keep your premiums low, as they have access to all policies on the market and know the best insurers for your situation.
When IPT increases, it becomes even more relevant to keep a close eye on your premiums and research all your options.