23 August 2016 - The UK standard rate of Insurance Premium Tax (IPT) is due to increase from 9.5% to 10% on 1st October 2016.
What does this mean?
This means that any policy that has an inception date on or after the 1st October will attract the new 10% rate. For clarity, HMRC define the inception date as the date when the period of cover under an insurance policy begins.
There will be a transitional period from 1st October 2016 until 31st January 2017 for mid-term adjustments that incur a premium on policies that incepted prior to the 1st October 2016.
So for policies incepted prior to 1st October 2016;
- Additional premiums that come into effect and are processed before the 1st February 2017 will attract the 9.5% rate of IPT
- Additional premiums that come into effect and/or are processed after the 31st January 2017 will attract the new 10% rate of IPT
- All return premiums on a policy incepted prior to the 1st October 2016 will continue to be taxed at the 9.5% rate
How will this affect you?
To ensure that we can process eligible premiums at the 9.5% tax rate, you need to provide us with the details of declarations by the 19th January 2017. Declarations received after this date should be considered as payable at the new tax rate of 10%. The new tax rate will also apply in the following circumstances:
- Extension of cover periods that forestall the new tax rate or the advanced payment of premium on a policy beginning on or after 1st October 2016
- Where deferred payment arrangements or instalments are agreed, any element of the premium that is booked in parts and is not recognised for tax purposes before the 1st February 2017 will be subject to the new rate of tax
The quick reference table shown below gives a summary to the appropriate rate of IPT that will be applied, based on the inception date, entry type and date on which it is processed.
If you have any questions, please contact our Billing & Collections team on +44 (0)1603 227727