On July 1st 2017, the Insurance Premium Tax or IPT was raised from 10% to 12%, which is only the second time the government has increased taxes on insurance in 12 months. The higher rate of IPT remains at 20% though. The new IPT rules are as follows:
- The IPT on any new policy or midterm adjustments (MTAs) drawn out after 1st June 2017 is 12 percent. It applies to all first time policies and renewals due after 1st June 2017.
- Any renewal or new policy drawn before 1st June 2017 will incur an IPT of 10 percent on all MTAs.
- The government has put a ‘backstop date’ of 1st June 2018, after which all premiums (additional or otherwise) will be taxed at 12% IPT.
Repercussions of the IPT Increase
The British Insurance Brokers’ Association (BIBA) believes the latest tax hike will affect 17 million drivers, 27 million households, and almost all businesses. Naturally, insurance premiums will increase as a result of higher taxation and this, in turn, can add to the number of uninsured businesses, drivers, and households in the UK. As it stands, the country is already heavily underinsured, and with higher premiums, business and personal insurance consumers may consider forfeiting or reducing requisite cover.
In a recent statement, Association of British Insurers (ABI) reproved the decision by Treasurer Phillip Hammond calling it “reckless and incredibly unwarranted.” An ABI representative went on to state that with the 2 percent increase in IPT, claims costs could increase and this, in turn, may result in higher cost of motor and liability insurance thus affecting businesses and individuals alike.
The latest round of IPT increase penalises the country as a whole as it profoundly affects younger drivers, businesses in flood risk areas and niche industries. Insurance is a means of recovering from unpredictable and often random circumstances. However, with the government’s decision to increase insurance costs, customers may decide that the risks outweigh the benefits and opt to go uninsured.
Insurance4MotorTrade is committed to its customer’s interests and will do all it can to keep the impact of higher IPT to a bare minimum by negotiating the best possible deals with underwriters and ensuring your insurance cover is competitive.