Insurance Premium Tax rate increase
Insurance Premium Tax (IPT) is a tax on general insurance premiums. There are currently two rates a standard rate of 10% and a higher rate of 20%. The higher rate applies where insurance is sold in relation to goods and services which are subject to VAT and to travel insurance.
As part of the Autumn Statement measures it was announced that the standard rate of IPT is to be increased from 10% to 12% from 1 June 2017. This will be the third increase to the standard rate since 1 November 2015.
From 1 June 2017, all premiums received by insurers using the IPT cash receipt method will be charged at 12%. For insurers using a special accounting scheme, there is likely to be a 4 month concessionary period during which premiums received that relate to policies entered into before 1 June 2017 will continue to be liable to IPT at 12%. From 1 October 2017, all premiums received by insurers will be taxed at the new rate of 12%, regardless of when the policy was entered into.
The Chancellor also announced the government’s plan to legislate next year to end the compensation culture surrounding whiplash claims. This could save drivers an average of £40 on their annual premiums.