General Insurance Article - Insurance Premium Tax increase on 1st November

 The standard rate of Insurance Premium Tax - the tax paid each time an insurance policy is purchased in the UK – is rising from 6% to 9.5%.

  

 This change will affect:

 7.3 million car policies
 4.7 million household policies
 3 million pet policies
 3 million private medical insurance policies

  

 Any of the affected insurance policies with a start date after 31 October will have IPT charged at the new rate. This is likely to add the following to premiums:

 Nearly £13 to the average comprehensive motor insurance policy
 More than £10 to the average combined building and contents cover.
 More than £10 to average pet insurance
 More than £40 to average private medical insurance

  

 The Government exempts the following products from IPT:

 Life insurance
 Mortgage insurance
 Insurance for spacecraft
 Commercial ships and aircraft
 International railway rolling stock
 Lifeboats and lifeboat equipment
 Goods in international transit

  

 Higher rate IPT remains unchanged at 20% and applies to:

 travel insurance
 warranties for some mechanical and electrical goods

  

 This means that a family with two cars, a pet and medical insurance is likely to have to pay almost £100 a year more once the increase comes into effect next weekend.

  

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

 "Whether you are a homeowner, 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 Treasury the IPT increase will bring in an additional £8.1bn for the Treasury by 2021*. This was the second largest revenue raiser in the Summer Budget.

  

 Insurance Premium Tax was first introduced to the UK in 1994. The rise on 1 November is the 4th increase in the standard rate since its introduction.

  

 From 1 October 1994, a single rate of 2.5% was charged
 1 April 1997: increased to 4%
 1 July 1999: increased to 5%
 4 January 2011: increased to 6%
 1 November 2015: increased to 9.5%

 *This is according to HMRC’s own figures summarising the impact of the move