- The standard rate, which increased from 6% to 10% since 2015, has now increased to 12%
- Understand Insurance Premium Tax and how it affects your finances
- Learn what you can do to help put an end to IPT hikes
What is Insurance Premium Tax?
IPT was first introduced in 1994 by the Conservative government as a single 2.5% rate tax on general insurance premiums.
Since then, governments have continued to increase IPT. In June 2017, the standard rate increased to 12% - a 140% increase over just six years.
Recent news reports suggest Chancellor Philip Hammond plans to introduce a further increase to IPT when he presents his Budget on 22 November.
These increases drive up the cost of insurance policies, as insurers have to cover the costs of this additional taxation.
“The government has incorrectly stated that insurance premium taxis a tax on insurers – it’s not, it’s a tax that consumers have to pay when they purchase insurance. In recent times, we’ve seen IPT increase on three separate occasions, so it’s extremely disappointing that the Treasury appears to be setting a precedent of placing an ever-increasing burden on hardworking consumers.”
Steve Treloar, Managing Director of LV= General Insurance.
There are two rates of IPT
- A standard rate of 12% (this is for things like car, home and van insurance policies)
- A higher rate of 20% - for travel insurance, mechanical/electrical appliances insurance and some vehicle insurance
This tax is built into your insurance quote – so, for example, the price you get for your car insurance will already include IPT.
Does a rise in IPT affect you?
If the Chancellor does decide to go ahead and introduce a higher standard rate of IPT, you’re almost certain to see an increase in the price of your car, buildings, contents, pet and private medical insurance. If he increases the higher rate, travel insurance premiums will have to go up too.
Younger drivers are likely to be hit hardest by an IPT increase – which may lead to even more young drivers attempting to drive without any cover at all. The Motor Insurer's Bureau, the organisation which compensates victims of uninsured drivers, said the number of accident claims it receives has already risen by almost 10% to around 12,000 a year.
By keeping the rate of IPT the same (or better still, lowering it), insurers can continue to keep premiums down.
How you can help fight unfair taxation
Research from think tank the Social Market Foundation has found that the government now raises £4.8 billion every year from the tax, the equivalent of £179 per household.
The Association of British Insurers believes that a rise in IPT rates is a punishment for people who do the right thing. James Dalton, Director of General Insurance Policy at ABI, said, “Repeatedly putting up Insurance Premium Tax impacts hardest on the poorest and it’s time for the Chancellor to end this raid on the responsible and commit to no further increases this Parliament.”
If you agree that IPT's unfair then share this video via social media, using the hashtag #IPTsUNFAIR