Most UK insurance prices include a tax you never see itemised at the till. Here’s how Insurance Premium Tax works.
Key things to know
- Insurance Premium Tax (IPT) is charged on most general insurance premiums in the UK.
- The standard rate is 12%, and a higher rate of 20% applies to some policies sold alongside goods or travel.
- Long-term life insurance and some other policies are exempt.
- IPT is usually included in the quoted price rather than added at the end.
When you buy car, home or travel insurance in the UK, part of what you pay is tax. Insurance Premium Tax (IPT) is charged on most general insurance.
The rates
| Rate | Applies to | Examples |
|---|---|---|
| Standard rate: 12% | Most general insurance | Car, home, pet insurance |
| Higher rate: 20% | Certain policies | Travel insurance, some insurance sold by suppliers of cars or electrical goods |
| Exempt | Specific types | Long-term life insurance, reinsurance |
HMRC publishes the full rules, including which policies fall into each category.
How it appears in your price
IPT is normally included in the premium you’re quoted. Your policy documents may show the amount of tax, but the price you compare is the total.
Why it matters
- Comparing quotes on the total price already includes IPT.
- Add-ons sold with goods, such as extended warranties or gadget cover, can attract the higher rate.
- Changes to IPT rates are announced in government Budgets and can affect renewal prices.
Worth doing
If a retailer offers insurance at the till, compare the price with a standalone policy. The higher rate of IPT and the retailer’s margin can make the bundled option more expensive.
Check your policy
IPT rates and rules can change. Check GOV.UK for the current rates before relying on these figures.
Keeping costs in perspective
Tax is a fixed part of most premiums, so the savings come from the rest of the price. Our guides to renewal pricing rules and using comparison sites cover where you can make a difference.
Questions answered
Is IPT the same as VAT?
No. Insurance is exempt from VAT, and IPT is a separate tax on insurance premiums.
Can I avoid paying IPT?
Not on taxable policies. It’s built into the premium, so compare the total price when shopping.
Who pays IPT to HMRC?
The insurer is responsible for paying it to HM Revenue and Customs, but the cost is passed on in the premium.
This guide is general information, not financial or insurance advice. Policies differ, so always read your own policy documents and check with your insurer. If you have a complaint, your insurer’s complaints process and the Financial Ombudsman Service can help.