As you will be aware, last November saw the first substantial increase to Insurance Premium Tax (IPT) from 6.5% to 9.5%. Subsequently, in a following Budget announcement the Government has opted to increase this further by 0.5% up to 10%. This rate increase will apply to all insurance policies incepted from 1st October 2016.
The increase will apply to all renewals and new insurance policies for both personal insurance policies (excluding travel) and commercial insurance policies from 1st October.
It is worth noting there is a 4 month HMRC concessionary period which allows for any policies incepted before October 1st to apply Mid-Term Adjustments to be taxed at the lower rate if they fall before January 31st 2017. However if you choose to take out additional cover to your existing policy you will still be subject to the IPT increase (eg. adding buildings insurance to a contents only policy).
What do you need to do?If you are in any doubt as to whether your policy will be affected then please get in touch with your usual insurance representative, but otherwise you don’t need to do anything. The IPT change will be applied automatically to your policy if it falls within the above parameters.
Who does this affect?Anyone who purchases an insurance policy residing within the UK; the Channel Islands and Isle of Man are not part of the UK, therefore IPT does not apply.
What if I pay by Direct Debit and my policy started before 1st October 2016?All premiums agreed before the cut-off date will still stand as long as the policy was incepted before October 1st, payments will not adjust after the concessionary period.
What if I receive a quotation before October 1st, will the premium still stand if I incept after this date?All quotes are dependent on the current level of IPT, therefore if you choose not to incept the policy until after October 1st then the premium will be subject to the new level of IPT.
If you are still unsure or in need of further information then get in touch with your broker who will be able give additional clarity.