Insurance Premium Tax (IPT) directly affects the price of insurance premiums. One study suggested that around 84% of UK homes pay IPT.
The Association of British Insurers (ABI) have described IPT as a “hidden in plain sight” tax and called for a cut in IPT rates.
In this post we’ll explain what IPT is, who pays it, and explore whether any changes in 2024 are likely.
Are you getting the best deal on your home insurance? Our friendly team of insurance experts can help you get the cover you need at a competitive price. For more information, call us on 0208 290 9086, or email personal@anthonyjones.com.
What is Insurance Premium Tax?
IPT is a tax on general insurance premiums. Some types of insurance are exempt from IPT. This includes life insurance policies, certain health insurance policies, and certain types of commercial vehicle insurance.
Insurance Premium Tax Rates
There are two IPT rates: A standard rate, and a higher rate.
Standard Rate: The standard rate applies to home, car, and pet insurance premiums. Currently, the standard rate is charged at 12%.
Higher Rate: The higher rate applies to travel insurance, certain forms of vehicle insurance, and cover for mechanical or electrical appliances. Currently, the higher rate is charged at 20%.
These rates have been in place since 2017, and when they were first introduced, they represented a significant rise over previous rates. In 2015, the standard rate was just 6%.
A Tax “Hidden in Plain Sight”
The ABI is currently campaigning for the government to cut IPT rates, which they say will help households and businesses struggling with the cost of living crisis. As well as describing IPT as a tax “hidden in plain sight”, they have also described it as a tax that “punishes responsible choices”.
In February 2024, Mervyn Skeet of the ABI said: “It is high time we unmask this tax which penalises people and businesses for being responsible.
“This tax hits the poorest hardest because they typically spend more on insurance, such as home and motor cover, as a proportion of their income.
“There has never been a better time for the government to show its support to the millions of homeowners and businesses who do the right thing by buying insurance. We should cut IPT now.”
Will IPT Change in 2024?
Since the ABI launched their campaign, no changes have been made to the IPT rate. However, there has been a general election, so the UK now has a new Labour government.
The ABI responded to the election result by saying: “We look forward to working closely with the Government to deliver on our mutual priorities. Our industry shares many areas of common interest with the new Government … By working together, we can find solutions to some of the country’s biggest challenges.”
The ABI has also published a proposed agenda for the Government. This agenda includes some calls to cut the IPT rate, yet it remains to be seen what position the new Labour government will take on this issue.
The Anthony Jones Position: IPT Should Be Reduced, If Not Abolished
Mark Stevenson, Anthony Jones Managing Director, said:
“We fully support the ABI stance that IPT should be reduced, if not abolished. It drives up overall costs and has led to an increase in those choosing not to insure at all, including car owners.
“IPT means that insurers and brokers are just tax collectors for the Government. If that’s the case, then we feel we’re qualified to say that this tax is simply unfair. We call on all insurance buyers to petition their MP to call for a reduction.”
Dedicated Insurance Services You Can Trust
No matter what happens in the coming years, you can depend on the friendly risk and insurance experts at Anthony Jones to support you every step of the way.
When it comes to home insurance, our dedicated team can help you get the cover you need at a competitive price. For more information, call us on 0208 290 9086, or email personal@anthonyjones.com.
