This increase to 12% is the third increase in the standard IPT rate in under two years.
The standard rate of Insurance Premium Tax (IPT) will increase from 10% to 12% from June 2017. This increase will mean the rate will have doubled from 6% to 12% in under two years. HM Treasury appears to link the increase in IPT to proposals to reduce whiplash claims which it believes will allow insurers to cut motor insurance premiums. Any reduction in motor insurance premiums might be offset by this increase in IPT. It will, however, inevitably result in a premium increase for insureds for other types of insurance, with the consequence being that some may fail to take out or renew essential, and often compulsory, insurances. The increase in the IPT standard rate will take effect from 1 June 2017.
It is estimated that the increase in the IPT rates will raise an additional £680 million in 2017/18, rising to £840 million the year after. Anti-forestalling provisions are already in place to prevent tax avoidance. These provisions apply to both accounting schemes (special and cash received). Insurers will need to review their systems to ensure that the new rates are applied correctly.
T: +44 (0) 20 7311 5417
T: +44 (0) 20 7311 2427