Insurance Premium Tax rise from 4th Jan

madmittens

Have just received a letter from my (pet) insurers about the imminent government increase in the rate of Insurance Premium Tax, from 5% to 6%, and informing me that my direct debit will be increasing...

I confess I'm being lazy (as I was on here at the same time as reading the letter), but surely as I signed up to the policy (for a quoted amount for the year, paid by monthly DD?) they can't increase the cost mid-term? Am I going to receive similar letters in relation to my car/household insurance etc.?

Off to dig out the policy docs, before giving them a call to complain

opinions4u

If the policy is paid up front by a loan, and you fund a loan monthly, then there should be no increase.

If the premiums are simply collected monthly then you should expect to see an increase.

Out of interest, is it more than 10p a month?

dunstonh

but surely as I signed up to the policy (for a quoted amount for the year, paid by monthly DD?) they can't increase the cost mid-term?

They are not increasing the cost. They are collecting the tax that was increased by the Govt.

As O4U says above, if you paid annually (all in one go) then you would not have to pay the increased amount as its based on when the insurance is collected. Not when the premium was set (unless a credit agreement was in place). So, monthly pay as you go style insurance will see the increase from January. Annual payments will see the increase at next renewal/payment point.

madmittens

Thanks opions4u

It seems to be 12p/month increase - is that relevant?

If I've agreed to pay the premium by monthly DD, would it be a 'loan' from the insurers or just collected monthly at additional cost? How would I know?

opinions4u

madmittens wrote: »

It seems to be 12p/month increase - is that relevant?

Nah, only trying to tell you not to lose sleep over it - we're all in this together!

If I've agreed to pay the premium by monthly DD, would it be a 'loan' from the insurers or just collected monthly at additional cost? How would I know?

It depends if there's a credit agreement involved or not.

Brize

opinions4u wrote: »

If the policy is paid up front by a loan, and you fund a loan monthly, then there should be no increase.

If the premiums are simply collected monthly then you should expect to see an increase.

It's not as simple as that. Much depends on the insurer's accounting practices. In the medical insurance market, for example, most monthly payers won't see the increase in IPT until their policy renews.

bouncydog1

Brize is correct but this does not generally effect the man in the street - it will mainly impact credit arrangements between insurers and their larger insureds who may have leeway in when they settle premiums. e.g. if a risk is written on 1 January and insurer accounts for IPT on a booked basis, the IPT due will be at 5% regardless of when the insurer receives the premium.

However if the insurer accounts for the IPT return on a cash received basis and the policyholder doesn't get the money to them until 5 January, tax will be due at the increased rate of 6%.

The method of how the IPT is accounted for is agreed between insurers and HM C & E.

So basically, as others have said, if you are paying your insurance premium by direct debit to your insurer they are collecting it monthly and any premiums received from 4 January will be taxed at 6%.