Insurance Premium tax applies to many different insurance types including private medical insurance, dental insurance and cash plans and within the sector we have seen a rise in the last 2 years from 6% in 2015 to the current rate of 10% now. Travel Insurance is also subject to IPT but at a higher rate which is currently 20%
First introduced in 1994, Insurance Premium Tax (IPT) is a tax on general insurance premiums, this tax is calculated as a percentage of the insurance premium and therefore those who already pay a higher premium for their cover will also pay more tax.
There are a number of exemptions from IPT, including:
- most long-term insurance
- insurance for commercial ships and aircraft
- insurance for commercial goods in international transit
- premiums for risks located outside the UK – these may be liable to similar taxes imposed by other countries
In the Autumn Statement 2016 it was announced that the IPT rate is set to increase again in June 2017 which will detrimentally effect people choosing to have polices in place such as private medical insurance.
The British Insurance Brokers Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their customers and they produced an informative survey of their brokers about the IPT increase and the affect on policy holders.
Everyone knows that where a tax is applicable to a product whether it is IPT or VAT we have to pay it when it is applicable so make sure when you are purchasing any form of insurance policy that you know whether it will be subject to IPT and the current rates applicable. Your Insurance company or specialist broker should easily be able to confirm for you the split between the insurance costs itself and the amount you will be paying in tax.