In the 2016 Budget the UK Government announced that it would be increasing Insurance Premium Tax (IPT) from 9.5% to 10% with effect from 1 October 2016. This will apply to all new insurance policies as well as renewals.
This half per cent increase comes on top of the 3.5% increase in IPT that came into effect last November, when it rose from 6% to 9.5% but bear a thought for our European neighbours. In Germany they pay a huge 19% for their equivalent of IPT, and in Finland it’s even worse – they pay 24%!
One of the factors influencing the increase in IPT tax is to fund increased investment in flood defence and resilience*.
According to The Association of British Insurers (ABI), following the increase in IPT last November from 6.5% to 9.5% an average of only £10 was added to the buildings and contents insurance per UK household.
Not all types of insurance will be affected. Travel insurance policies are already charged at a higher rate of 20%, while mortgage protection and life insurance are exempt from the latest increase.