The UK Government announced in the 2016 Budget that there would be an increase in Insurance Premium Tax (IPT) effective from 1st October 2016.
The change will see a rise of 0.05% on the standard level of IPT for all insurers who provide non-exempt insurance for UK risks. The standard IPT rate is currently 9.5% but the new increased 10% standard rate will be due on premiums received on or after 1 October 2016.
There may be some exceptions, where insurers are operating a special accounting scheme. However, regardless of accounting schemes, the new rate will apply on all premiums from 1 February 2017.
It is expected that the change will not only affect insurers, but may also affect many UK households and business in the long term as insurers are likely to pass on the IPT rate increase to customers.
The objective of the policy as set out in the Budget is to help raise further funds to develop better flood defences and resilience to flooding in key areas.