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Insurance Premium Tax (IPT) goes up from 6% TO 9.5% for any policies taken out after 31 October 2015. What does this mean for your business?
Benjamin Franklin famously offered on two certainties in life; death and taxes. He might have since added a third; tax increases.
As the Government points out, Insurance Premium Tax (IPT) is a tax on general insurance premiums. There are two rates: a standard rate 6% (which will mostly apply to insurance covers a UK SME might be expected to have) and a higher 20% rate for travel insurance, mechanical/electrical appliances insurance and some vehicle insurance.
The change was highlighted in the summer 2015 budget. The Chancellor, George Osborne, claimed that insurance has become cheaper for many and that Britain’s relatively low insurance premium tax offered an opportunity to raise state revenue.
The impact of the change has been widely debated, with Osborne claiming only about a fifth of premiums would be affected, although critics have protested that many more would suffer. How will business insurance be affected?
From November 2015 IPT, the tax you pay on your business insurance policy, is set to go up by between 3.5% and 9.5%. For SME business owners this could mean anything from a small monthly increase to a significant addition to fixed cost overheads.
Unfortunately, your options are very limited: as the tax is on business insurer providers, you cannot avoid it. However, business insurers are likely to take different approaches to the IPT increase. Some may choose to pass on the increased cost, while others may take a hit to profits to offer a better deal.
Certainly, there has never been a better time to review your insurance policy. Shopping around could save you money and effectively nullify the potential additional costs.
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