Insurance Premium Tax to increase November 2015With effect from 1st November 2015, the rate of Insurance Premium Tax (IPT) will increase from 6% to 9.5%.

This change was announced by the Chancellor of the Exchequer in his budget in July, and will shortly be coming in to effect.

Who will be affected?

Anyone who purchases or renews insurance in the UK, which begins or renews on or after the 1st November 2015 will be affected. IPT is applied to both personal and business insurance premiums. The inception or renewal date of the policy will determine the rate of IPT you pay, rather than the payment date. So for example if your policy renews on the 1st November, but you pay two weeks beforehand, you will still need to pay the new higher rate.

How will you be affected?

If you have a live insurance policy, your premiums will increase accordingly at your next renewal. However, if you make a ‘mid-term adjustment’ (for example a change of vehicle under a motor policy) after the 1st November, the additional premium will probably be based on the new, higher rate. If you don’t currently have insurance and intend to take out cover, IPT of 6% will apply if you take out cover by 31st October. After that, it will revert to 9.5%.

Although this represents an increase of over 50% in the rate of tax paid on insurance premiums, the effects on both individuals and businesses will be relatively minimal. For every £100 in insurance premiums, you will now pay £109.50 in total, compared with £106.00 previously. This equates to an increase of 3.3% in the total paid. Even at 9.5%, IPT is still considerably lower than the rate of VAT (which doesn’t apply to insurance premiums).

If you have any queries about the increase in the IPT rate, contact us through the website or call your nearest office for more details.