In the 2016 Autumn Statement, the Chancellor confirmed an increase of 2.0% in the standard rate of Insurance Premium Tax (IPT). [The tax paid each time an insurance policy is purchased in the UK]. The increase is effective for new policies and renewals due on or after the 1st June 2017.
The standard rate of IPT is therefore rising from 10% to 12%. This is the second increase in the past 12 months.
This change will affect the majority of policies purchased by private individuals and small businesses including insurance for self-catering holiday lets where the risks are located in the UK.
Insurance Premium Tax increase effective 1st June 2017
Affected insurance policies with a start date after 31st May 2017 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 £10.00 bringing the total premium to £560 including Insurance Premium Tax at 12.0%.
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 £4.06bn for the Treasury by 2022*. This was the second largest revenue raiser in the Summer Budget.
James Dalton, director of general insurance policy at the Association of British Insurers (ABI), called on the government to halt the increase.
“This tax penalises hard working families, as well as businesses, who have done the right thing by taking out insurance to protect against many of life’s uncertainties,” he said. “This latest hike must be the last. The next government must freeze this tax, to give hard working households and businesses a break.”
Insurance Premium Tax was first introduced to the UK in 1994. The rise on the 1st June is the 6th 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%
- 1 October 2016: increased to 10%
*This is according to HMRC’s own figures summarising the impact of the move.
Boshers offer specialist holiday home insurance to owners across the UK. Require a quote for your holiday apartment, cottage or complex? Please give us a call on 01237 429444.
