During the summer 2015 Budget, the chancellor of the exchequer announced an increase of 3.5 percent in the standard rate of Insurance Premium Tax (IPT) taking it from the current rate of 6% to 9.5%.
The increase will apply to all policies incepted on or after the 1st November 2015 and this will affect both Personal Lines and Commercial business.
Customers taking on New Businesses or Renewing policies will see an increase in the annual premium, reflecting the change in IPT.
HM Revenue and Customs (HMRC) have allowed a concessionary period from 1st November 2015 until 29 February 2016 which will mean that policies incepted before 1 November 2015 will continue to be subject to the previous 6% rate of IPT as long as premium is received by your insurer before 1 March 2016.
In addition, this concessionary period will allow some Mid Term Adjustments to be processed at 6%. However, this will depend on when a policy is incepted and the effective date of the change.
The market assumes the rate % of Tax on insurance will eventually reach 20%, bringing it in line with the UK’s standard Taxable rate. It is not expected to increase in a single change.
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