Insurance Premium Tax (IPT)
Updated Budget 2007
This is a tax on the premium you pay for most general insurance policies. It was initially introduced at 2.5% on 1st October 1994 but was increased in stages to the current rate of 5% in July 1999.
Insurance Premium Tax (IPT) applies to general insurance policies where the risk is located in the UK. It includes motor, household, medical (including long-term cover), income replacement, travel and other protection cover. Life insurance policies and long-term plans with an investment element do not attract IPT.
Depending on how you buy your insurance, you may have to pay more tax. A higher rate of 17.5% was introduced in April 1997, which applies to all travel insurance and also to insurance policies purchased as add-ons to other products, for example on an extended warranty when you buy a television, you will pay IPT at the higher rate.
See also:
Moneyextra's Tax Centre
More information about IPT can be found on HM Revenue & Customs website.
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