Morrison insurance Solutions

Insurance Premium Tax – What’s new?


The Government announced in the Autumn Statement of 2016 that the standard rate of Insurance Premium Tax (IPT) would increase from 10% to 12%. The rate that took effect on 1st June 2017 is the third increase of IPT in the last two years.

What is it?

IPT was introduced in 1994 by the UK government to raise the revenue from the insurance sector. The tax is added on to the top of all general insurance premiums such as home insurance, car insurance, and travel insurance. It does not apply to long term insurance, reinsurance and some commercial forms of insurance.

For more information, visit: https://www.gov.uk/guidance/insurance-premium-tax

How does it impact you? 

All new business and renewals with a term start date on or after the 1 June 2017 will be charged at 12%. New business and renewals with a term start prior to 1 June 2017 will be charged at 10% provided the premium is booked in insurers systems by 31 May 2018.

There is a backstop date that allows insurers to write premiums for policies that have incepted or renewed prior to 1 June 2017 at the old IPT rate, provided it is processed by 31 May 2018.

Policies debited on 1 June 2018 or after this date will be liable for IPT at 12% with the exception of some return premiums. Return premiums always attract the rate of IPT applicable to the original premium that the return premium reduces.

If a policy with a term start date of 1 June 2017 or after is booked in underwriting systems prior to 1 June 2017, the IPT will be charged at 12% because cover commences on or after the rate change date i.e. 1 June 2017.

If a policy with a term start date prior to 1 June 2017 is booked in advance the IPT will be charged at 10% so long as the premium is booked before 31 May 2018.

 

If you would like more information on Insurance Premium Tax, or have any questions, please give us a call on 01789 766 888.

 

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