Do I pay any VAT on my insurance premium?

the word tax placed on a calculatorDo I have to pay VAT on my insurance premiums?

Insurance premiums are not subject to VAT on commercial and personal lines policies. However, please note that tax is still payable in the form of Insurance Premium Tax (IPT). 

 

There are two rates:

  • a standard rate
  • a higher rate - for travel insurance, mechanical or electrical appliances insurance and some vehicle insurance

The IPT rate is lower that the rate of VAT and the standard is set at 12%. Unlike VAT, insurance premium tax can not be recovered and like any tax is subject to change. The higher rate is set at 20%.

There are a number of exemptions from IPT, including:

  • most long-term insurance
  • re-insurance
  • insurance for commercial ships and aircraft
  • insurance for commercial goods in international transit
  • premiums for risks located outside the UK - these may be liable to similar taxes imposed by other countries

There is a useful page dedicated to Insurance Premium Tax on the UK Government website. Here's the link. 

For more information on this or to talk to one of our experts, please call us on 0345 251 4000.