The cost of running a property business crept up as Insurance Premium Tax (IPT) jumped by more than 50% at the start of the month.
IPT is paid on the annual cost of premiums of all property business insurance policies.
The tax rate was hiked from 6% to 9.5% by Chancellor George Osborne in his Summer Budget 2015.
The measure is expected to raise an extra £8.1 billion in revenue for The Treasury by 2021.
The increase covers a range of landlord insurances:-
- Motor insurance on cars and vans
- Buildings insurance
- Landlord contents insurance
- Rent guarantee cover
- Emergency cover for boilers
- Employer liability insurance – statutory cover for businesses with staff on a payroll
For a landlord with a portfolio of properties with a combined insurance premium cost of £1,000, the increase in IPT represents a jump in costs from £60 a year to £95 a year.
IPT is collected at source by insurance companies and remains a tax deductible expense for landlords.
The increased IPT rate will be charged on policy renewal or when a new policy is taken out.
James Dalton, director of general insurance policy at trade body the association of British Insurers, said: “Whether you are a homeowner, driver, own a pet or buy medical insurance, millions of people across the country face being hit in the pocket by this rise in insurance premium tax.
“Whether it’s a legal requirement or you want to buy extra cover, insurance is a financial safety net, not a luxury.
“While insurance remains one of the most competitive industries in the UK, its affordability can’t be taken for granted. Further tax increases must be avoided if insurance is to remain accessible for all.”
In addition to the IPT increase, most insurers upon a renewal add on an optional 5% or so uplift in respect of the rebuild value. This combined with the IPT increase could easily look on paper like an almost 10% increase before considering any premium uplift. Members of the Guild can use our competitive landlords buildings insurance.