Insurance Premium Tax (IPT)

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 the Customs and Excise website and the public notice IPT1 Insurance Premium Tax

Last Updated: April 2008 © Moneyextra.com

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