RMweb Premium Claude_Dreyfus Posted November 23, 2010 RMweb Premium Share Posted November 23, 2010 Way back in June the Government announced the Insurance Premium Tax (IPT) would be increased as of 4th January 2011. It got somewhat lost in the announcement to increase VAT, but it is there and may well have an effect on any premiums you pay in installments. Most insurance policies are subject to IPT (including almost all day-to-day policies with the notable exception of Life coverage) which is classified in two bands. Lower rate is currently 5%, and this covers most general insurances; motor, household, Employers Liability etc. Higher rate is mainly used in general insurance for travel, and this will increase from 17.5% to 20%, in line with VAT. Essentially there will be two ways your insurer will deal with this: Some will pass the increase to you as the customer Some may choose to absorb the increase in their profit margin Most will pass the increase on to the customer, and those of us who do have the increased passed across will see a small (normally a couple of pence) increase to the monthly premium. This should take effect during the January billing cycle; however one or two may spill across to February. Really insurers should be contacting their policyholder to notify them of the changes in advance, but in my experience this does not always happen. Whilst this announcement has not caught the industry unawares, there has been some confusion as to how this should be implemented and HMRC have been deluged by queries from insurers...do check your policy documents for any reference to external taxes; some make reference, some don't. There is a rather dry 'explanatory' note from HMRC here... http://www.hmrc.gov....get2010/ipt.pdf One important note of explanation... If you have an annual policy which is normally paid on one lump sum and the premium is due and paid prior to the 4th January, then the tax should be the older rate. Obviously any premium paid after this date will be at the new higher rate. If you may your premium (as many of us do) via monthly direct debit, any attempt to clear off your remaining premium in a single payment prior to 4th January will be considered as 'avoidance', and you will be charged the higher rate. The anti-avoidance rule applied from the date of the announcement. Also, do remember that this increase in premium is not going to the insurance companies coffers. There are very strict accounting guidelines that have to be adhered to that means that all the increase passes to HMRC, so it's no good having a go at your insurer over any increase! Quick disclaimer... The examples given are not exhaustive, so there may well be all manner of exceptions. Some insurers operate different accounting systems that may well effect when an increase is passed on. If in doubt, contact your insurer... Link to post Share on other sites More sharing options...
Wherry Lines Posted November 23, 2010 Share Posted November 23, 2010 Thank you for the info C_D. I don't think a lot of people had even considered IPT increasing. I hadn't! Link to post Share on other sites More sharing options...
28XX Posted November 25, 2010 Share Posted November 25, 2010 Insurance is institutionalized gambling. Paying anything more than the legal minimum is throwing money away. My parents have no buildings or contents insurance (they own the house outright) and have never regretted it in 55 years. My father buys a new car cash every 5 years and only ever insures it 3rd party. They have savings and are very careful people though. Link to post Share on other sites More sharing options...
Jenny Emily Posted November 25, 2010 Share Posted November 25, 2010 Insurance is institutionalized gambling. Paying anything more than the legal minimum is throwing money away. My parents have no buildings or contents insurance (they own the house outright) and have never regretted it in 55 years. My father buys a new car cash every 5 years and only ever insures it 3rd party. They have savings and are very careful people though. The trouble is that insurance comes into its own on that one occasion that you really need it. A gale blows off your roof? With no insurance this unforseen catastrophe could proove very costly. Flooding? It can happen even in properties considered low risk, as I witnessed some years ago when heavy rains overwhelmed the storm drains and a terrace of houses half way up a hill became in the way of a lot of runoff that had nowhere else to go other than in through the front doors and out through the backs. Imagine a tree blows over and crushes your car? Fire caused by a lightning strike? There are so many reasons that insurance will be worth it, no matter how careful you think you are. Link to post Share on other sites More sharing options...
Poggy1165 Posted November 27, 2010 Share Posted November 27, 2010 I always thought this was a very bad tax, punishing people for being prudent. Of course if you are very rich - that is to say have millions in the bank - you can 'carry your own risk'. For anyone else it's - risky! Imagine a workman falling off a ladder while working on your house and suing you. Even if he doesn't win a small fortune in court you will have months of worry. Insurance covers us from such problems. Link to post Share on other sites More sharing options...
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