What is IPT and How Does It Affect Your Insurance?

Insurance is quite a complicated thing, made up from a series of rating factors that are determined by our individual details – things like age, type of car, points on our licenses. But one thing that is a constant on all policies is called IPT or insurance premium tax. There have been some headlines about it recently as the rate has recently increased. But what is it and how does it affect your insurance policy price?


IPT was introduced by the government of the time back in the early 1990s when they believed that the insurance sector wasn’t paying enough taxes. So they added IPT and set it work in a similar to way to VAT – it is added to the price of the policy.

Back then, the IPT rate was set at 2.5% but like everything, this has been increasing. By 2015, it was up to 6%. The latest increase took place at the beginning of October 2016 and saw it continue to increase with the aim being for it to reach 9.5% by 2021. The rate at the moment stands at 10% – an increase of 7.5% in just 20 years.

The government say that the rise in IPT will make a lot of money for the economy – around £8.1 billion by 2021 at the new higher rate. But unfortunately, this is reached because we are all paying more on our insurance bill.

Does This Affect My Policy?

Because IPT is applied to a policy regardless of personal details, then we are all likely to see a change in the cost of our insurance. Currently, IPT is charged on car, home, pet and health insurance as well as breakdown cover for your car. It is even charged on administration charges on your policy so if you change your car and the insurer charges you £10, there will be IPT in this figure.

Some policies have a higher rate of IPT already – examples include travel insurance and mechanical and electrical appliance cover. Because these are already at the higher rate, they won’t change until the rest of the policies reach the same rate as them. So this means your travel insurance isn’t likely to increase due to IPT.

There are a few types of insurance that are excluded from IPT so the change will not affect them. One of the most common types is life insurance.

Can You Still Get Your Insurance To Go Down?

The good news is that while the rise in IPT is unavoidable, talking to your insurer and doing some editing can end up saving you money. Make sure you disclose all relevant information to your insurer and be certain that all the details on the internet are correct. Incomplete information can lead to a policy being voided and mean you are without insurance – and that doesn’t save you anything at all!

Get in touch with our helpful staff to find out what IPT means for you.