You may have heard that on October 1st the standard rate of Insurance Premium Tax (IPT) increased from 9.5% to 10%. This follows a previous rise from 6% last November. Although the forthcoming increase isn’t anywhere near as steep as last year’s hike, it is still a significant rise, particularly coming so soon after such a big jump in the tax rate, which was just 2% when it was first introduced in 1994.
Why haven’t I heard of IPT before?
If IPT is unfamiliar to you, it’s probably because it’s levied by the government on insurance providers, rather than the public. It seems inevitable, however, that insurance companies will pass on the increased costs to their customers in the form of higher prices. Needless to say, our teams at Alan Boswell Group will still do their best to find you the best value for money available, because we can arrange cover with a broad range of insurers.
Why has IPT been increased?
The rise in IPT was announced by former Chancellor of the Exchequer George Osborne in the 2016 budget. The increase is intended to raise funds for flood defences and resilience schemes in UK towns hard hit by flooding over successive winters.
Obviously, these floods led to a huge surge in insurance claims, which insurers did their best to meet. In theory, better flood defences will mean insurance companies make fewer and smaller payouts. That’s why insurance companies are essentially funding the schemes via IPT.
How will it affect me?
Although IPT is a tax on insurance companies rather than the public, it is likely that companies will raise the prices of their products to cover costs. It’s possible, however, that some may choose not to do so, in order to maintain a competitive edge. Equally, of those companies that do raise their prices, some may raise them more than others, or may distribute the additional expense differently.
It’s also worth noting that insurers may also implement the increased level of tax if you make any changes to policies taken out before 1st October 2016. That could mean you pick up additional costs, but is dependent upon your insurer.
What should I do?
The advantage of working with a fully independent insurance broker like Alan Boswell Group is that we can review your current insurance policies to make sure that you’re not paying more than you need to. We can even help you to find better value policies if appropriate. This is not just a case of searching the market for the cheapest deals, but also being aware of hidden costs that may affect you or the steps you can take to reduce potential risk.
While the IPT increase may leave you paying slightly more for your insurance, we will do our best to minimise the extra expense and offer the best value deals on the market. Speak to us today to find out more.