Did you know that the insurance tax on your premiums will be going up in November 2015? The annual change has seen a rate rise in the previous few years, but there’s something different happening this year. HMRC are declaring a transitional period allowing brokers and insurers to adjust to the new higher rate. Read below to find out more about the insurance tax and what it will mean for you.
Unfortunately there’s no real reason for having the tax on insurance premiums, it’s purpose is simply to raise revenue for the running of the country. Seeing as the insurance sector is not subject to VAT, it makes sense for the government to tax premiums as they are often viewed as under-taxed. First introduced in 1994, the insurance tax has gone on to raise £2.3 billion in the fiscal year 2009/2010. [source]
The tax is reviewed yearly, and as of November 2015 it has been decided that the standard rate will rise to 9.5% while the higher rate will not increase, leaving it at 20% in line with VAT. Under the government document stating the details of the insurance premium tax increase, the policy objective is stated as: “This measure will increase the revenue raised by ITP.” And that’s it. An increase in 3.5% on the standard rate.
Luckily for you, the Government has stated that it expects the impact of the tax to have no effect on individuals, households and families. This is mostly due to the fact that the most popular insurances in the market are exempt from this tax – Life Insurance, permanent Health Insurance and other ‘long term’ insurances as well as many others exempt.
For brokers and insurers, there’s an expected cost of updating systems to apply the new tax rate – thus the reason for the transitional period. Small businesses are unlikely to feel any burden from the increase in the insurance tax rates.
Other than that, there are no other predicted impacts of the tax rate increase. Keep your eyes peeled for further updates from HMRC as they monitor the impact through info from tax returns and receipts.
For further advice you can read the history of Insurance Premium Tax here, or the 2015 rate increase details here. If you have any questions for HMRC then you can call Helen West on 03000 585836 or email her at firstname.lastname@example.org
To get your insurance sorted our now, don’t hesitate to contact Active Brokers on 01245 850 150, filling in a contact form on our website, or using the chat function to talk directly to an insurance adviser.