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Structural Defects Insurance: Insurance Premium Tax to increase

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.

Specialists in Construction Insurance

The Office for Budget Responsibility have certified figures which project the impact of the increase on income for the Exchequer.

In 2016 it is estimated an extra £80m will be generated, with this figure jumping to £200m in 2017 - 2018.  A full summary of the expected revenue generated from 2016 - 2021 can be seen below.

2016 to 2017          +   80m

2017 to 2018          +   200m

2018 to 2019          +   205m

2019 to 2020          +   210

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