Insurance premium tax to rise to 10%

London - Big ben and houses of parliament, UK

Budget 2016: The standard rate of insurance premium tax (IPT) is to rise from 9.5% to 10%.

The 0.5% increase will come into effect from October 2016.

Chancellor George Osborne announced the rise in IPT in his Budget 2016 speech today (16 March).

The rise will be invested in flood defences and resilience measures.

Osborne said: “To respond to the increasing extreme weather events our country is facing, I am today proposing a further substantial increase in flood defences. That would not be affordable within existing budgets.

“So I am going to increase the standard rate of insurance premium tax by just half a percentage point, and commit all the extra money we raise to flood defence spending. That’s a £700 million boost to our resilience and flood defences.”

Steve Herbert, head of benefits strategy at Jelf Employee Benefits, said: “This has implications for many personal and corporate insurances, and from an employee benefits perspective particularly for healthcare insurances.

“Many will recall that IPT increased significantly only last year.”