Insurance Premium Tax rate rise
16 March 2016
Whilst arguably modest if viewed in isolation, this latest rate rise of 0.5% (to 10%) will mean Insurance Premium Tax (IPT) will have increased by two thirds in less than a year. Overall, this equates to an additional IPT cost of over £17 on the average motor insurance premium and around £13 on buildings and contents policies. It remains to be seen the extent to which this is passed on through higher premiums.
This will undoubtedly fuel further speculation about the rate heading towards 20% to be aligned with the VAT rate as is already the case in some other countries such as Germany and the Netherlands.
Perhaps of greater concern to many insurers is the prospect of gradual but frequent rate rises. This announcement follows only days after the full implementation of the last rate rise and implementing these changes entails significant and often expensive systems changes and administrative processes.