Budget 2016 - PwC comments on Insurance Premium Tax
Commenting on the 0.5% rate rise (to 10%) to Insurance Premium Tax (IPT), Ben Flockton, insurance tax partner at PwC, said:
"Whilst arguably modest if viewed in isolation, this latest rate rise will mean IPT will have increased by two thirds in less than a year. Overall, this equates to an additional IPT cost of over £17 on the average motor insurance premium and around £13 on buildings and contents policies. It remains to be seen the extent to which this is passed on through higher premiums.
"This will undoubtedly fuel further speculation about the rate heading towards 20% to be aligned with the VAT rate as is already the case in some other countries such as Germany and the Netherlands.
"Perhaps of greater concern to many insurers is the prospect of gradual but frequent rate rises. This announcement follows only days after the full implementation of the last rate rise and implementing these changes entails significant and often expensive systems changes and administrative processes."
IPT rise may seem small but could have a big impact
Adrian Smith, Global Head of IPT, KPMG, comments on the decision to raise the rate of Insurance Premium Tax by 0.5%, saying:
“With the recent floods fresh in the mind, there is an obvious political rationale for the Chancellor ring fencing the money raised by increasing IPT. The rise by 0.5% to 10% appears small, but the rate of IPT has risen 66% since last summer. This will be worrying for insurers but could also mean individuals and businesses may fail to take out or renew essential, and often, compulsory insurances.”
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