Insurance Premium Tax to rise to 9.5%
It was announced in the summer budget that insurance premium tax (IPT) will increase to 9.5% with effect from 1 November 2015.
All insurance policies with an inception or renewal date of 1 November 2015 and later will be subject to the new 9.5% IPT rate.
Special accounting scheme
We use the ‘special accounting scheme’. This means that the premium for risks incepting prior to 1 November 2015 (at the current 6% IP rate) MUST be paid by 29 February 2016.
The higher rate of 9.5% IPT applies to when the risk is bound rather than when it is quoted. Any risk bound on 1 November onwards will be liable for 9.5%.
The higher rate of 9.5% IPT refers to the renewal date rather than the date we receive instructions. For example, a risk incepting 1 November where we receive instructions 30 October will attract 9.5% IPT. If a risk has a 30th October renewal date and we place it on extension for 7 days prior to confirming renewal terms this will attract a 6% level of IPT.
Additional and return premiums 1 November 2015 onwards
Any return premium is given at the rate of tax levied when paying the premium. Any additional premiums after 1 March 2016 are charged at 9.5% IPT. Any additional premiums for policies incepting prior to 1 November 2015 will attract 6% IPT until 29 February when this will revert to 9.5% regardless of when the policy was incepted. For policies incepted after 1 November 2015, IPT will be 9.5% regardless of when additional premium is processed.
Further information can be found on the HMRC website.