From 01 October 2016, the standard rate of Insurance Premium Tax (IPT) will rise by 0.5% from 9.5% to 10.0%. This is the second increase to IPT in less than twelve months.
Reason for the increase in IPT
The increase was announced by the former Chancellor of the Exchequer, George Osborne MP in the 2016 Budget. He said “I am going to increase the standard rate of Insurance Premium Tax by just half a percentage point – and commit all the extra money we raise to flood defence spending. That’s a £700 million boost to our resilience and flood defences.“
With the increase in IPT from 6% to 9.5% from 01 November 2015 and this new increase, it is expected to generate an additional £8.1billion for the Treasury’s coffers by 2021.
Who is affected?
The new rate impacts all types of general insurance policies ranging from Motor and Household through to Office, Employers Liability, Public Liability and Professional Indemnity insurance.
Background to Insurance Premium Tax
Insurance Premium Tax was first introduced in 1996 at a rate of 2.5%, since then, there have been increases to 4% (1997), 5% (1999), 6% (2011) and 9.5% (2015).
Want to know more?
If you need any guidance on how Insurance Premium Tax affects your policies, please contact us and we will be happy to discuss this with you.
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