Insurance Premium Tax Increase Hits Your Pocket From Today
1st June 2017
Hard-pressed households face a further squeeze on their family budgets when the latest increase in the government's Insurance Premium Tax (IPT) to 12% comes into effect on 1 June, only eight months after it rose to 10%. The tax is payable on most general insurance policies including home, motor, pet, private medical insurance, and cash plans taken out by individuals, as well as commercial insurance taken out by businesses.
This latest increase could add an extra £47 to the average household's annual general insurance bill. Overall, the current rate of IPT at 12% could now be adding an extra £283 a year to a typical household's annual insurance bill as the rate has now doubled since November 2015. This latest hike will mean that the Government will rake in £5.8 billion a year from IPT.
This latest rise comes at the worst possible time, with average premiums rising due changes to how personal injury compensation is calculated, rising repair bills, and a resurgence in whiplash-style claims.
Insurance customers who pay higher premiums will be worst hit. For example:
Young and older drivers who tend to pay more for motor insurance. A typical 19 year old driver for example could see their annual motor premium increase by £20 following this latest rise.
Those with private medical insurance and cash plans could face an extra £39 a year on their premium.
Businesses will also be hit - the 12% rate could add an extra £300 in commercial insurance premiums
Insurance Premium Tax was first introduced to the UK in 1994.
From 1 October 1994, a single rate of 2.5% was charged
1 April 1997: increased to 4%
1 July 1999: increased to 5%
4 January 2011: increased to 6%
1 November 2015: increased to 9.5%
1 October 2016: increased to 10%
1 June 2017: increased to 12%
The Government exempts the following products from IPT:
Life insurance
Mortgage insurance
Insurance for spacecraft
Commercial ships and aircraft
International railway rolling stock
Lifeboats and lifeboat equipment
Goods in international transit
