Insurance Premium Tax

Key takeaways

• Insurance Premium Tax (IPT) is a 12% or 20% rate applied to most UK insurance premiums

• There are IPT exemptions for some products, such as life and mortgage insurance

• Insurers pay IPT, but they often pass on these costs to customers via higher prices

What is Insurance Premium Tax (IPT)? 

Insurance Premium Tax (IPT) is a tax that the UK government applies to most insurance premiums in the UK. This includes car insurance, home insurance and travel insurance.

How much are Insurance Premium Tax rates? 

There are two main IPT rates: 

💡 Top tip: The higher rate of 20% is applied to car insurance bought from a dealership alongside a new car. It's therefore often cheaper to buy car insurance separately instead of bundled with a car purchase. 

Are there any exemptions from Insurance Premium Tax? 

Yes. They include: 

• re-insurance

• life insurance and permanent health insurance (but medical insurance is not exempt)

• mortgage insurance

• insurance for disabled drivers who lease vehicles under the Motability scheme

Does Insurance Premium Tax affect the price of car insurance? 

Yes. Although IPT is a tax levied against insurance companies, its costs are often passed on to customers in the form of higher premiums.

Should I worry about Insurance Premium Tax? 

It's useful to be aware of IPT as it contributes to the overall cost of your insurance, but you don't have to pay it directly.

If you're worried about insurance costs generally, you can often save money on premiums by: 

• Shopping around and comparing quotes  from different insurers: 

• Taking steps to be seen as a lower-risk customer by insurers

• Paying annually rather than monthly