Changes to Insurance Premium Tax from 1st November 2015

Posted on by Anthony Wakefield & Co

UK tax on Household, Motor, Commercial and most other types of general insurance (apart from Travel Insurance  and some other categories of insurance where the tax is already at 20%) is set to increase from 6% to 9.5% from 1st November 2015.

This is estimated to raise an additional £530m for the Government in the current tax year, rising to £1,460m in 2016-7 (source HM Revenue & Customs)

As well as applying to new policies and renewals after this date, this change will affect most additional insurance transactions from that date, even for those policies that were put in place or renewed prior to 1st November 2015.

To avoid any confusion, we are urging those of our clients that pay their premiums to us, rather than pay direct to the insurer under an instalment plan, to ensure that premium is received prior to 1st November 2015 for business that applies prior to that date in order to continue to qualify for the current 6% tax rate. Late payments, if accepted under exceptional circumstances, will be charged at the 9.5% tax rate.

We will be applying the 9.5% rate to all transactions that apply after the 1st November 2015, including those renewals for which invitations are sent out from now until that date.

There have been contingencies put in place by HM Revenue & Customs to prevent clients from avoiding paying the additional tax by, for example, extending the policy or adding a new location to the cover.

Also, any refunds of premium after 1st November 2015 for policies incepting or renewed prior to that date will only benefit from a tax refund at the original rate paid (6%).

There are some transitional allowances that have been offered for changes to current policies that may result in some tax for amendments being charged at 6%, even after 1st November. If we find that this applies to your policy we will refund any tax that is due to you.