Insurance policies are going to cost more from the 1st November 2015 following an increase in insurance premium tax.

What is Insurance Premium Tax?

Insurance premium tax (IPT) is a tax that’s added to each insurance policy bought in the UK. At the moment we pay 6%, but from November 1 that’ll rise to 9.5%.

The ABI estimates that it the rise will affect 7.3 million car policies, 4.7 million household policies, three million pet policies and three million private medical insurance policies.

Insurance policies with a start date after October 31 will be charged IPT at the new rate. This adds:

  • almost £13 to the average comprehensive motor insurance policy;
  • more than £10 on combined building and contents cover;
  • more than £10 on average pet insurance;
  • over £40 on private medical insurance.

Life and mortgage insurance are both exempt from the tax, while the higher insurance premium tax rate of 20% still applies to travel insurance and warranties for some mechanical and electrical goods.

 

James Dalton, Director of General Insurance Policy at the ABI, said:

“Whether you are a home-owner, driver, own a pet or buy medical insurance, millions of people across the country face being hit in the pocket by this rise in Insurance Premium Tax. Whether it’s a legal requirement or you want to buy extra cover, insurance is a financial safety net, not a luxury.

“While insurance remains one of the most competitive industries in the UK, its affordability can’t be taken for granted. Further tax increases must be avoided if insurance is to remain accessible for all.”

 

According to the government, the IPT increase will bring in an extra £8.1 billion for the Treasury by 2021, the second largest revenue raiser in this year’s Summer Budget. The rise on 1st November is the fourth increase in standard rate since the tax was introduced in 1994.

If you have any questions please don’t hesitate to  contact us on 0121 448 6914 or email us bromsgrove@coversure.co.uk.