Insurance premium tax to rise to 9.5% – how can we help offset the impact?
Much to the surprise of the insurance industry and many financial commentators, the summer budget has produced a rise in Insurance Premium Tax (IPT) from 6% to 9.5% effective from 1st November 2015. Heralded as a stealth tax by many commentators, the 60% rise in IPT will result in a firm paying a £50,000 professional indemnity premium incurring an additional £1,750 of costs. This is not an insignificant increase given the fact that many firms continue to struggle with rising Professional Indemnity costs and continued pressure on margins.
The increase will of course, not only impact Professional Indemnity but all classes of insurance from private motor through to office and contents. Commenting on the rise in IPT, Steve White, CEO of the British Insurance Brokers Association said, “We are extremely disappointed in this rise in Insurance Premium Tax…. Those hit by this stealth tax will include the 20.1 million households with contents insurance; 19.6 million with motor insurance and 17 million with buildings insurance.”
Whilst the Treasury has stated that IPT in the UK continues to be lower than that of several other European countries, the increase will nonetheless see the treasury coffers boosted by an additional £1.5 billion of income per annum. The impact of the increase on the insurance industry may be softened by the Government’s promise to crack down on claims management companies by capping charges and undertaking a fundamental review of how they operate. However it has still resulted in critics stating that this will result in both private and commercial customers under insuring in an attempt to manage costs.
About the Professional Indemnity Division at Howden
Howden has one of the UK’s most respected professional indemnity insurance broking teams. We have the knowledge and expertise to look after businesses operating across a range of sectors and territories. We are market leaders in many of the UK’s professional services sectors and our client base includes some of the world’s leading professional services firms.
Howden insurance brokers is part of the world’s largest employee-owned insurance group Hyperion. Founded in 1994 as a wholesale broker, Hyperion now has businesses across retail and wholesale broking and underwriting. Hyperion is a global business generating £400m revenue per annum from over 120 offices around the world. With over 3,000 staff worldwide Hyperion is the fifth largest producer at Lloyd’s.