We get a lot of questions about Insurance Premium Tax (IPT) and why its charged.
Value Added Tax (VAT) is not applied to the insurance industry and thats where Insurance Premium Tax (IPT) comes in.
There are two rates of IPT:
- A standard rate of 12% from 1st June 2017.
- A higher rate of 20% – for travel insurance, mechanical/electrical appliances insurance and some vehicle insurance
IPT must be added to insurance quotes. If you’re quoted £200, then that’s the price you pay including IPT.
The standard rate, which increased from 6% to 9.5% in 2015 and to 12% in 2017.
How IPT affects you?
The rate of the standard IPT is the same for most policyholders.
The standard 12% rate is still lower than many other EU member states which have a standard IPT rate of 19%. This doesn’t take into account that insurance prices in the UK are higher compared to other European countries.
The increased to 12% has raised £700 million extra income for the government, which is being used to help fund flood defences.