Insurance Premium Tax (IPT)

Insurance Premium Tax (IPT) was first introduced on October 1, 1994 by the Conservative Government as a single 2.5% rate tax on insurance.

On April 1, 1997 the standard rate was increased from 2.5% to 4% for general insurance. A new higher rate tax of 17.5% was also introduced for sales of travel insurance, electrical and mechanical domestic appliance insurance and motor vehicle breakdown insurance policies.

On July 1, 1999 the standard rate increased from 4% to 5% with the higher rate remaining unchanged. The rates remained the same until the announcement in the emergency budget on June 22, 2010; the standard rate will increase from 5% to 6% and the higher rate will increase in line with VAT from 17.5% to 20% from January 4, 2011.

Some might argue that the forthcoming increase has been a long time coming, with further increases likely in the UK if it is to follow other European economic powers such as Germany. However, others recognise the delicate state of the UK economy and are concerned about the effects that this increase will have on already high motor insurance premiums and consumers’ willingness to purchase risk protection insurance. It now remains to be seen what the future holds for Insurance Premium Tax in the UK insurance market.

To find your local insurance expert visit www.cherrypickedinsurance.co.uk/ta/bpf