Spring has sprung and as sure as Summer will follow Spring another Insurance Premium Tax (IPT) increase is on the way. From 1st June 2017, the rate of IPT will see a further 20% increase from the current 10% to 12%.
This latest increase is the third within the space of nineteen months, having moved from 6% to 9.5% in November 2015 and then to 10% in October 2016. No sooner had the calculation of IPT become a simpler mental arithmetic equation the new Chancellor announced the uplift in his first, and last, Autumn Statement.
Again, the insurance industry and its applicable taxation has been identified as a ‘soft target’ to increase annual Government revenues to around £5.6 billion from the sector.
Indeed, the 25th and final point in the Autumn Statement summary on www.gov.uk reads as follows ;
‘IPT is a tax on insurers and it is up to them whether and how to pass on costs to customers’
To our knowledge, there have been no insurers who have stated that they will bear the burden of this IPT increase on behalf of their policyholders.
As with much of the UK economic outlook post Brexit, there is no certainty around what lies ahead. While we can be sure IPT will increase in future, we do not know when or by how much.
Thankfully, we may be spared a benchmarking exercise against our soon-to-be former European counterparts, some of whom have IPT rates around to 20% mark.
Tip – IPT is chargeable to the full policy period at the point of inception. If your policy renewal date falls before 1st June, an 18 or 24 month policy (if available) will ‘lock in’ the prevailing 10% IPT rate for a longer period of time.