For those of you that don’t know what Insurance Premium Tax (IPT) is then allow me to provide you with an explanation. Basically it is the VAT of the Insurance world with the only difference being that it is a mere 5% compared to the higher 15% of VAT. All insurance policies are subject to this taxation with the few exceptions like commercial aircraft insurance and commercial ships and lifeboats insurance which are tax exempt.
Many people in the insurance industry are breathing a sigh of relief after the 2009 budget was announced and IPT was again left at 5%. This was welcome news to the ears of the Insurance Brokers and Companies as it would of course put insurance premiums up without any benefit to them. In fact an increase would in fact hinder them in several ways.
If the percentage were to increase then the public would see an increase in their Insurance Premiums which is not what anyone wants to happen, especially in the midst of an economy shrink of 3.5%, said to be the worst performance since 1945. However the insurers and brokers would be the ultimate losers as less people will take out non compulsory insurance in a bid to save money. On top of this, the insurers/brokers would be handling more money with no extra income. This could mean paying higher credit card fees for their client’s payments.
If we look back at the history of Insurance Premium Tax then we can see that it is not something that changes a lot and has now been kept at 5% for the past 10 years after its increase to that figure back in July 1999. Given that it was started back in 1994 and was originally at the low level of 2.5% the fact that in the last 15 years it has only been doubled to the low sum of 5% then both Insurance Companies, Brokers and Clients can be glad that despite everything, yet again, there was no mention of increasing this current figure.