Insurance Premium Tax - An overview

Ever since the government declared in its 2010 budget there was to be a rise in Insurance Premium Tax, underwriters and brokers the nation over have been gearing up for the change.

It was announced in June of this year that there would be an additional 1% to pay for I.P.T. in January 2011 to 6%. This is alongside the increase to VAT which will also rise from 17.5% to 20% in the coming months.

The move, unpopular to many; from businesses to individuals alike, was cited as an attempt to get a handle on the UK deficit and will take effect from 4th January 2011. It is understood that the increase will help to raise £0.5 billion a year for the treasury by 2014-15.

However, there are growing concerns that the move could have alienated insurers and forced unseen extra costs onto their IT budgets whilst gearing up for the change. Many insurance software platforms have been developed in recent years and the IPT rate, never changing for over 10 years (1999), was hardcoded into the programs resulting in expensive alterations.

Overall, the change does not appear to have been a catalyst for much dispute and insurers are pleased the current rate of 5% was not doubled to 10% as first thought. And, compared to our European cousins like Germany and Italy, whose rates are 19% and 22% respectively, come January 2011 the UK will still possess one of the lowest Insurance Premium Tax rates across the EU.