As of the 1 October 2016 the standard UK insurance premium tax rate will increase from 9.5% to 10%. The higher rate of IPT is to remain at 20%.
How will the new IPT rate affect your current insurance policy?
For any insurance policies with an inception date of after the 1 October 2016, the new standard rate of 10% will apply to all risks which are located in the UK. There is a transitional period will take place between 1 October and 1 February 2017. This window allows insurers to write certain premiums that have renewed or incepted prior to the 1 October 2016 at the old rate of 9.5%.
What are the treatments of instalments?
For any insurance policies which are incepted before the 1 October 2016 where premium payments are made on an instalment process, these will still adopt the 9.5% rate, as long as the initial instalment is processed before the 1 February 2017. Alternatively, the 10% rate will apply to any polices which are processed in parts on or after the 1 February 2017. For instances where there are a series of policies requiring cover, then any inceptions dates from the 1 October 2016 will endure the 10% increase.
Who is responsible when it comes to managing any changes?
It is the responsibility of both the insurer and the insurance broker to ensure that the business is processed correctly. It is important for firms to review their current insurance policies and to consider what impact the increase in IPT will have on all placed risks.