The Chancellor has just announced that the UK standard rate of insurance premium tax (IPT) will be increased by 0.5 percentage points to 10%, funding a boost to spending on flood defence and resilience of over £700 million by 2020-21.
st October 2016 all premiums received by insurers using the IPT cash accounting scheme will be charged at 10%. For insurers using the special accounting scheme, there will be a 4 month concessionary period that will begin on 1 October 2016 and end on 31 January 2017, during which premiums that relate to policies entered into before 1 October 2016 will continue to be liable to IPT at 9.5%.
From 1 February 2017 all premiums received by insurers will be taxed at the new rate of 10%, regardless of when the policy was entered into.
Insurers should begin to plan for the increase now, as systems will need to be updated.