Insurance Premium Tax (UK)

Insurance premium tax (IPT) is a tax on general insurance premiums within the United Kingdom.

Law

The main law relating to IPT is in the:

• Finance Act 1994, sections 48-74 and Schedules 6A, 7 and 7A, as amended by the Finance Acts 1997, 1998 and 1999. This is the primary legislation, which establishes the principles of IPT.
• Insurance Premium Tax Regulations 1994 (Statutory Instrument 1994/1774 - as amended) which gives more details about the operation of the tax.

Rates

There are two different insurance premium tax rates:

• A standard rate of 6 per cent
• A higher rate of 20 per cent

You must register and account for insurance premium tax if you are an insurer providing taxable insurance. You will also have to register and account for insurance premium tax if you are an intermediary selling insurance subject to the higher rate of insurance premium tax and you charge a separate insurance-related fee, over and above the insurance premium itself.

Rate change history

• 1 October 1994 to 31 March 1997 - a single rate of 2.5 per cent

From 1 April 1997, two rates where charged.

Standard rate:

• 1 April 1997 to 30 June 1999 - a standard rate of 4 per cent;
• 1 July 1999 to date - a standard rate of 5 per cent.
• From 4 January 2011, the standard rate rose to 6 per cent.

Higher rate:

• 1 April 1997 to date a selective higher rate of 17.5 per cent on certain types of insurance arranged through certain suppliers of other goods and services
• From 1 August 1998, the higher rate was extended to all taxable travel insurance, regardless of the type of supplier.
• From 4 January 2011, the higher rate rose to 20 per cent, in line with VAT.

Exemptions

All types of insurance risk located in the UK are taxable unless they are specifically exempted. Exemptions from this tax include:

• Commercial aircraft insurance
• Commercial ships and lifeboats insurance
• Export finance
• Insurance for risks outside the UK
• Insurance on commercial goods in international transit
• Insurance on international railway rolling stock
• "Long-term" insurance, including life insurance and permanent health insurance, but excluding medical insurance
• Reinsurance

See also

• Financial services (broader industry to which insurance belongs)
• Financial Services Authority (body that regulates financial services within the UK)
• HM Revenue & Customs<re>Customs.hmrcgov.uk</ref>
• Insurance
• Tax