Mark Donaldson, protection, health and wellbeing customer service manager, Johnson Fleming
A rise in the standard Insurance Premium Tax (IPT) rate from 6 to 9.5 per cent came into effect on 1 November 2015. With effect from 1 October 2016, IPT is set to increase again from 9.5 to 10 per cent.
The move is expected to generate billions annually for the Treasury but is highly controversial, being labelled a ‘stealth tax’ by some. It is estimated that the IPT hike will add £73 per annum to the average household bills.
The government has advised that the new standard rate of IPT will be due on insurance premiums treated by the legislation as received on or after 1 October 2016, except where insurers operate a special accounting scheme. From 1 February 2017, the new IPT rate applies to all premiums, regardless of when the contract was entered into.
This will affect all policies which attract IPT, such as private medical insurance (PMI), dental insurance, cash plans and stop loss insurance for healthcare trusts.
Policies that are exempt from IPT are:
- Group life assurance
- Group income protection
- Critical illness cover
- Health screenings
This will affect private medical insurance (PMI) premiums in particular, but there will also be a knock-on effect on national insurance (NI) contributions and benefit-in-kind tax.