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Insurance Premium Tax to rise on Car Insurance

From 1st June 2017, the standard rate of insurance premium tax (IPT) will be increasing from 10% to 12%, which means your car insurance will see an increase.

What is Insurance Premium Tax (IPT)?

Insurance Premium Tax first came about in 1994 and was a 2.5% tax on a majority of insurance policies. Over the years, it has increased and will be rising to a standard 12% rate on 1st June 2017. Some insurance policies have a higher rate and are subject to a 20% tax.

How is IPT worked out?

IPT is automatically added onto your policy and is a percentage of your whole insurance premium. For example, if your car insurance policy was £600 before IPT (at the 10% rate) it would be £660. With the 12% tax rate it will increase to £672.

Who is affected by IPT?

IPT affects all drivers, but in particular younger and newly qualified drivers. This is because newly qualified and young drivers have to pay very high premiums. It is estimated that 17-24 year old drivers pay on average £1,306 for their car insurance premiums. With the increased IPT, young drivers can expect this insurance premium to rise even more.

Is the IPT increase a good thing?

As mentioned earlier, the increased IPT will affect those paying the higher insurance premiums the most i.e. young or newly qualified drivers and may dissuade drivers to take out insurance and risk driving without insurance.
 
You can also find yourself paying the 20% high IPT rate if you take out a car insurance policy with a car dealership when buying a brand new car. As this may be sold as an add-on, you may be charged the 20% IPT rate rather than 12%.

Motor Trade Insurance quotes

Road Runner Insurance are happy to be able to offer motor traders a motor trade quote! Don’t forget that if you have any questions about your motor trade insurance premiums and IPT, you can get in touch with us to speak with a member of our team.

Road Runner is a trading name of Aston Scott Ltd. Authorised and regulated by the Financial Conduct Authority (Reg No. 308048). For your protection, telephone calls may be recorded or monitored.

Copyright © Aston Scott Ltd 2015. All rights reserved. Road Runner, 28 Dingwall Road, Croydon, CR0 2NH. Tel: 0330 822 0468

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