Here is what you need to know about Insurance Premium Tax (IPT) changes
What is it?
Although VAT is the most common form of tax, it’s not applicable on insurance — that’s where IPT comes in…
There are two rates of IPT:
- A standard rate (currently 9.5%) which is applied to pet, motor, mobile, contents, buildings and private medical insurance
- A higher rate (20%) which is applied to travel insurance, mechanical/electrical appliances insurance and some vehicle insurance (e.g. motor vehicles used for disabled people and even spacecraft!)
What are the changes?
The IPT standard rate will be increasing from 9.5% to 10% effective from the 1st October 2016.
From this date all renewal premiums and additional premiums following mid-term alterations will attract IPT at the new rate.
Further information can be found here:
Common pitfalls and what to do?
When entering insurance data into Sage make sure you use the “T2 – exempt” tax code.
A common mistake when entering insurance on Sage is to assume IPT is VAT and reclaim the IPT %. Please note IPT is not VAT and cannot be reclaimed.
Disclaimer: The information in this article was correct at time of publishing. Please note legislation is subject to change by HMRC. The Government website was the primary information source used in this article.