Insurance Premium Tax (IPT) will increase to 12% from June 2017. The increase from the current 10% was revealed by Chancellor of the Exchequer, Philip Hammond, in the Autumn Statement- the third time the tax has been increased in less than two years. In July 2015 the Summer budget saw it increase to 9.5% and just months later, in March 2016, it went up again to 10%.

What is the impact?

This increase is a blow to businesses. In recent years, insurance premium costs have been decreasing, but studies showed an increase last year. Many have labelled the rise in IPT a ‘stealth tax’.

Who will be affected?

1) Businesses will suffer.
The increase in IPT will result in higher insurance premiums.  This means that businesses will have higher operating costs, which may result in lower profits or a rise in charges for their services or products. Alternatively, some businesses may feel financial pressure to cut back on their insurance cover, placing them at an increased risk and precariously exposed to dangers such as fire, flood and theft.
2) Consumers will suffer.
Experts calculated that the rise in 2015 rise added £100 to the average family’s insurance bill. This further rise is an additional burden to responsible consumers.
And will particularly hit those paying higher insurance premiums, such as young drivers, and home owners in flood risk areas.

Ultimately, IPT increases will affect those individuals and organisations that take prudent steps to protect themselves, by arranging insurance, and reduce the burden on the state.

Conclusion

Here at Talbot Jones Risk Solutions we are committed to dealing with clients in an open and transparent way. This includes providing clear breakdowns of the costs involved in arranging insurance. We have worked successfully with clients to reduce their IPT bills by switching our advice from a commission basis (paid by insurers) to a fee basis, on which IPT is not levied. This has the additional benefit of allowing our clients to see exactly what they are paying for and enabling them to judge if they are receiving value for money from us. If this kind of arrangement appeals to you, feel free to get in touch.

If you have any questions or concerns, you are welcome to call us on 0191 438 79 77 for further information or advice