The government increased the IPT rate from 10% to 12% in June last year
The government took almost £6bn from Insurance Premium Tax in the year ending 31 July 2018.
This represents a 22% increase from the year before, according to the accountancy group UHY Hacker Young (UHY), and a 55% increase from £3.8bn in 2016.
The IPT rate was increased from 10% to 12% in June last year after the government announced it in the 2016 Autumn Budget.
The government predicted the increase would generate an extra £608m in tax, but the year ending 31 March saw the added tax raised to £808m, 19% more than expected.
UHY says the increase is down to businesses having to take out more policies to increase their income. But with the increase of policies, coupled with the increased tax rate, companies are being hit twice.
Another reason is the increased demand for certain types of policy that isn’t compulsory but could be very damaging if not taken out.
For example, businesses are having to insure against the growing threat of cybercrime. There were an estimated 1.7m cybercrimes in the UK last year, but just 47 prosecutions related to computer hacking.
Richard Lloyd-Warne, partner at UHY Hacker Young, says: “The Treasury is benefitting from the necessity of insurance by more than they had originally expected.”
“The fact is that businesses are now facing more threats than ever, all of which must be insured against. Just as the risk of a cyber-attack has ballooned over the last few years, new threats are likely to spring up in the future.”
“There is also a range of other insurance policies that many businesses are forced to buy such as employees’ liability insurance and professional indemnity.”
“The Government, however, could choose to concentrate taxation on areas that they want to discourage, rather than taxing something that businesses have little choice to do.”