IPT costs: surprisingly small jump, but there maybe more to come
The Chancellor’s 2016 Budget may have turned out a few headline-makers, with the media crowding around the subject of the sugar tax like wasps around a glass of Coke. But somewhere further down the page is another tax increase which has attracted less attention. The chancellor increased the rate of insurance premium tax (IPT) to 10%, up 0.5% on the present rate.
The increase is smaller than many anticipated, and the money raised is to be ring-fenced to improve flood defences across the UK. At IHC, having an office in Cornwall, we are very familiar with the havoc that flooding can bring, and we support the move to increase funding for this important issue.
We were, though, surprised that the increase to IPT was this small. We had anticipated an increase of IPT bringing rates to 12.5%, and we believe there is a strong chance that there will be further increases to this tax in the future. We have products that will help our clients to manage potential increases, such as policy options for employers to review where IPT is not levied on Employee Benefit Trusts.
For firms with international cover, it is worth checking how a provider handles the cost of IPT. “Different firms approach the tax in different ways,” says David Heppard, head of international at IHC. “With some insurers, the price of IPT is absorbed within their premiums, while others may charge clients IPT as a separate cost on top of the premiums.”
Another area that may well receive closer attention in the future is salary sacrifice benefits. Paul Roberts, consultant at IHC, says: “Those with salary sacrifice benefits need to take a look at their programmes – anything outside of the main categories of health screening, pension, bikes and childcare are most likely to get axed, although the Chancellor expects businesses to change their behaviour before he is forced to legislate.”