Glossary · UK
What is Insurance Premium Tax (IPT)?
A tax on general insurance premiums charged in the UK. Standard rate is 12%; higher rate of 20% applies to travel insurance and certain other policies.
Full Definition
Insurance Premium Tax (IPT) is a tax on general insurance premiums sold in the UK, introduced in 1994. It is charged on the insurer and typically included in the premium quoted to the customer. There are two rates: the standard rate of 12% applies to most general insurance products, including home, motor, pet and commercial insurance. The higher rate of 20% applies to travel insurance, mechanical or electrical appliance insurance (extended warranties), and some vehicle insurance where the policy is arranged through a vehicle manufacturer or dealer for a vehicle purchased or leased from them, and the insured person is under 17 years old. Life assurance, permanent health insurance, commercial ships and aircraft insurance, reinsurance, and insurance for commercial goods in international transit are exempt from IPT. IPT is not VAT and cannot be reclaimed as input tax. Unlike VAT, there is no registration threshold; insurers must account for IPT on all taxable premiums from the first pound. The standard rate was last increased in June 2017 from 10% to 12%. IPT is declared and paid to HMRC quarterly. It applies only to premiums for risks located in the UK, determined by specific rules on risk location.