In the Summer Budget, announced 8th July 2015, the Chancellor confirmed an increase of 3.5% in the standard rate of insurance Premium Tax (IPT). The increase is effective for new policies and renewals due on or after the 1st November 2015.
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 the majority of insurance policies purchased by private individuals and small businesses for risks located in the UK.
Affected insurance policies with a start date after 31 October will have IPT charged at the new rate. This will increase the cost of a Holiday Home Insurance policy with a net premium of £500 by £17.50 bringing the total premium to £547.50 including Insurance Premium Tax at 9.5%.
If you are an existing Boshers holiday home insurance customer, with a policy start date before the 1st November 2015 and you need to make a change to your policy mid-term, you will continue to have the 6% rate applied until 1st March 2016. After this date, the rate will be 9.5%.
Higher rate IPT remains unchanged at 20% and applies to:
- travel insurance
- warranties for some mechanical and electrical goods
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
The IPT increase is one of the chancellors more controversial revenue raising measures and the government has come under fire from the Association of British Insurers (ABI) who will continue to lobby to halt further increases. One of the justifications made by Mr Osbourne to justify the increase was that the UK’s insurance premium tax is well below that of other countries, for example Germany levies 19%.
Boshers offer specialist holiday home insurance to owners across the UK. For more information on how a specialist insurer can help and support your holiday home business, please give us a call on 01237 429444.
