Insurance Premium Tax: Difference between revisions
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IPT is calculated based on the gross premium. For example, if the gross premium is £1000 and the IPT rate is 10%, the IPT amount will be £100 and the total amount charged to the policyholder will be £1100. | IPT is calculated based on the gross premium. For example, if the gross premium is £1000 and the IPT rate is 10%, the IPT amount will be £100 and the total amount charged to the policyholder will be £1100. | ||
As a result of IPT being levied, insurance products are generally outside the scope of Value Added Tax (VAT). | |||
== United Kingdom == | == United Kingdom == | ||
The current rate of IPT in the UK is 12%. | The current rate of IPT in the UK is 12%, however a higher rate of 20% is charged on travel insurance. Some products are exempt from IPT, including: | ||
* Most long-term insurance, e.g. life insurance. | |||
* Reinsurance. | |||
* Risks located outside of the UK - although these may be subject to IPT in the country where the risk is located. | |||
Usually when the IPT rate changes, the rate applied to a policy is that in force at inception or renewal, and this applies to all premiums collected or returned. However, sometimes anti-avoidance measures will be implemented, such that an additional premium will be charged at the rate in force as of the effective date of the adjustment giving rise to the additional premium, even if a different rate was in force at inception or renewal. | |||
== Channel Islands == | == Channel Islands == | ||
Although | Although some UK insurance policies cover the Channel Islands by default (especially motor insurance), the Channel Islands do not have IPT. | ||
Latest revision as of 09:56, 12 August 2025
Insurance Premium Tax (IPT) is a tax implemented by several countries which applies the majority of insurance products.
IPT is calculated based on the gross premium. For example, if the gross premium is £1000 and the IPT rate is 10%, the IPT amount will be £100 and the total amount charged to the policyholder will be £1100.
As a result of IPT being levied, insurance products are generally outside the scope of Value Added Tax (VAT).
United Kingdom
The current rate of IPT in the UK is 12%, however a higher rate of 20% is charged on travel insurance. Some products are exempt from IPT, including:
- Most long-term insurance, e.g. life insurance.
- Reinsurance.
- Risks located outside of the UK - although these may be subject to IPT in the country where the risk is located.
Usually when the IPT rate changes, the rate applied to a policy is that in force at inception or renewal, and this applies to all premiums collected or returned. However, sometimes anti-avoidance measures will be implemented, such that an additional premium will be charged at the rate in force as of the effective date of the adjustment giving rise to the additional premium, even if a different rate was in force at inception or renewal.
Channel Islands
Although some UK insurance policies cover the Channel Islands by default (especially motor insurance), the Channel Islands do not have IPT.