Insurance Premium Tax

⚠ Insurance Premium Tax looks like VAT and is not. It is charged on insurers rather than on you, and passed on in the premium — and a VAT-registered business cannot reclaim it.

Which means all of it is a real cost

VAT on most business purchases washes through: you pay it and reclaim it. IPT does not, because insurance is exempt from VAT rather than zero-rated, so there is no input tax to recover. A business budgeting for insurance as though the tax were recoverable is short by the whole of it.

Taking it off is dividing, not subtracting

The same arithmetic as VAT: the tax is a percentage of the premium before tax, not of the total. Subtracting the rate from a tax-inclusive figure understates the premium every time.

The higher rate is narrower than people expect

It applies to travel insurance, and to cover sold alongside mechanical or electrical appliances and some motor vehicles. Ordinary motor, home, pet and business insurance is at the standard rate.

What this does not cover

The exemptions, which are broad: most long-term insurance, reinsurance, insurance for commercial ships and aircraft, and risks outside the UK. Whether a premium is taxable at all, which depends on where the risk is located rather than on where you are. And the insurer's own registration and returns.

Where these figures come from

Every rate above is read from a dated rate file rather than written into the page, and each one is checked against the gov.uk page it came from. How these numbers are kept right sets out the whole process.

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