From 1st June 2017 the tax on insurance, insurance premium tax (“IPT”), will increase from 10% to 12%.
The latest rise marks the sixth time the rate has been increased since its introduction in 1994. This 2% hike will also be the third increase in IPT since November 2015. This means that IPT will have doubled, from 6% to 12%, in a period of less than two years.
The Director General of the Association of British Insurers (“ABI”) described the increase as “a hammer blow for the hard pressed”, adding that it would “hit consumers and businesses alike”. The British Insurance Brokers’ Association (“BIBA”) agreed adding that it would particularly affect those that are “just about managing”.
What does the increase in IPT mean to your business?
For professional indemnity insurance (“PII”) policies with an inception date prior to 1st June 2017 the current rate of 10% will be applied.
For policies with an inception date on or after 1st June 2017 the increased rate of 12% will be levied.
If you make amendments to a PII policy that incepted prior to 1st June 2017 then, depending on when the changes to your firm’s cover come into effect, any additional premium charged by your insurer may be subject to IPT at the higher rate of 12%.