Important changes to Insurance Premium Tax on your insurances
In the Summer Budget, announced 16 March 2016, the Chancellor confirmed an increase of 0.5% in the standard rate of Insurance Premium Tax (IPT). This will be effective from 1 October 2016. This increase will see the standard rate move from its current 9.5% to 10%.
Standard Rate IPT
The rate increase is applicable to standard rate IPT only. The higher rate of IPT – charged for travel insurance, mechanical/electrical appliances insurance and some vehicle insurance – remains unchanged at 20%.
How might these changes affect you?
New Business: If your annual policy cover starts on or after 1st October 2016 the new IPT rate of 10% will apply.
Renewals: If your annual policy renewal cover starts on or after 1st October 2016 the new IPT rate of 10% will apply.
Mid-Term Adjustments: The rate of IPT that is charged is dependent on the insurance commencement date of the policy:
Additional cover mid-term: If processed on or before the 31st January 2017 on an existing policy with a cover commencement date prior to the 1st October the IPT rate remains 9.5% and not the higher rate of 10%.
Additional cover mid-term: If processed on or before the 31st January 2017 on an existing policy with a cover commencement date on or after the 1st October the IPT rate will be processed at the higher rate of 10%.
All additional cover requirements processed on or after 1st February 2017 will attract the new rate of IPT at 10% regardless of the existing policy commencement date.
Return premiums: If you make a change to your policy that results in a refund becoming due to you, this will be processed at the rate originally charged when the policy commenced. For return premiums on policies that commenced before 1st October 2016 9.5% will apply, not at the higher rate of 10%