What is Insurance Premium Tax?
Insurance Premium Tax (IPT) is a tax on general insurance premiums, including car insurance, home insurance and pet insurance. Introduced by the government in 1994, there are two rates of IPT: a standard rate of 12% (as of 1 June 2017) and a higher rate of 20%, which applies to travel insurance, electrical appliance insurance and some car insurance.
IPT works in a similar way to VAT as it’s added as a percentage to the total cost of your insurance premium. So, if your car insurance was £500 before IPT, it would increase to £560 after the standard rate of 12% is added.