Understanding the Insurance Premium Tax (IPT) Changes
In November 2016 the Chancellor, Philip Hammond, announced a further increase will be applied to the standard rate of Insurance Premium Tax (IPT) from 1st June 2017. The rate had remained static at 6% from January 2011 to November 2015. This latest increase is the third in the space of 18 months and will see the standard rate increase to 12%.
The increase will apply to all policies incepted and any adjustments made to existing policies post-June 2017.
The UK Government has linked previous IPT increases with the need to fund further flood protection. If we accept that climate change is a fact of modern life, it is unlikely that Government strategy will change any time soon.
Furthermore, our impending exit from the EU is unlikely to influence the gradual increase in the rate of IPT. The fact that the equivalent rate in Germany is 19% and in Italy varies between 12.5% and 16% (depending on province) suggests that realistically we should all be preparing ourselves (and budgeting for) further increases in the future.
Zach Gray is Commercial Director at D E Ford Insurance Brokers.