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Insurance Premium Tax increase

Insurance Premium Tax increase INSURANCE PREMIUM TAX

Insurance Premium Tax (IPT) is a tax on general insurance premiums. There are two rates. A standard rate of 10% and a higher rate of 20%. The higher rate applies where insurance is sold in relation to goods and services which are subject to VAT and to travel insurance.

It was confirmed as part of the March 2017 Budget announcements that the government will legislate in Finance Bill 2017 to increase the standard rate of IPT by 2% (to 12%) from June 2017. The anti-forestalling legislation will also be updated to take account of this change.

There are a number of exemptions from IPT such as life insurance, permanent health insurance, reinsurance, insurance for commercial ships and aircraft and insurance for commercial goods in international transit.

HMRC’s Notice IPT1 Insurance Premium Tax explains:

  • What IPT is, how it applies to insurance contracts and who it affects;
  • How to register for IPT and account for the tax;
  • What to do in the event of a change of rate of tax;
  • What to do if IPT is paid to HMRC in error;
  • An explanation of the penalty system.

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