Is your building insurance policy set to rocket?

NLA Property Insurance gives you the lowdown on the latest hike to Insurance Premium Tax (IPT).

Well, they may not exactly rocket, but they are set to rise potentially by as much as £12.50 per policy, due to a yet another jump in IPT from 1 June 2017. The changes, which come in under the Finance Act 2017, will be the third time in as many years that IPT has risen.

What is IPT?

IPT is a type of indirect tax levied on general insurance premiums in the UK, and it was first announced by the then Chancellor of the Exchequer, Kenneth Clark, in the November 1993 Budget, as a way of raising revenue from the insurance sector.

The rate of IPT was originally set at 2.5% of the underwriting premium in 1994, and by 2011 had risen to 6%. However, in November 2015 the rate was hiked to 9.5%, a year later it rose to 10%, and now is set to be 12% from June 2017.

Why do I pay it?

Most insurance policies underwritten in the UK are subject to this tax and while there are a few exceptions, for the vast majority of us this is a tax that we have to pay. Certain insurance policies, mainly travel related products, are actually subject to a 20% IPT rate (the same as VAT) effective from January 2011.

Why is it rising again?

Increased competition in the sector has driven down premiums in recent years, which means the Government’s tax take on insurance premiums is falling. The additional 2% is predicted to raise an estimated £855m by 2021/2022, with the revenue expected to go towards financing the Government’s infrastructure plans over the next 5 years.

How will it affect me?

The landlord insurance market is already extremely competitive, and while the Association of British Insurers (ABI) predicts that the changes will have little or no effect on smaller landlords, larger portfolio landlords are expected to see a marked increase to their premiums, with the new rate likely to add more than £12.50 to the average combined building and contents policy. It could also have the negative affect of under-insurance or stripped-down cover, which in the shorter term will pay dividends but in the medium to long term could cause greater financial risks.

What else do I need to know?

The new rate of IPT (12%) will apply to new insurance policies and renewals (business), commencing on or after the 1 June 2017 – in most cases this will be taken as the date the insurance policy incepts – so check whether any quotes you receive before the 1 June factor in the additional 2%, otherwise your premiums could change.

Any amendments to existing policies commencing 1st June or later will be subject to the new 12% rate, and return premiums (or cancellations) must be processed using the rate that was applied to the original transaction, irrespective of inception date or process date. If you pay your premiums by instalments the IPT rate applied will be the rate in place when the policy was first incepted.

Advice for landlords

We suggest that landlords review their level of cover to ensure they are properly protected, and to make any changes before 1st June 2017 to keep additional premium costs to a minimum. For a quote, or for individual guidance and advice, call our customer services line on 0344 980 0299 or visit And remember, NLA full members receive a 15 per cent discount.

For more information about the NLA, visit

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