Insurance Premium Tax
Insurance premium tax is a tax that is set by your country of residence and is collected by the provider or insurer on behalf of the government.
The Finance Act 1994 first introduced Insurance premium tax for general insurance which would include travel insurance.
The UK insurance premium tax was originally set at a single rate of 2.5%. In 1998 a higher rate of UK insurance premium tax was introduced at 17.5%. This was later increased to 20% in January 2011 in line with VAT.
When you take out a travel insurance policy any fees and charges will be clearly shown for you to see. These will also include the travel insurance tax.
Not all insurance policies are eligible for insurance premium tax and the following risks would be exempt:
- Commercial aircraft insurance
Commercial ships and lifeboats insurance
Insurance for risks outside the UK
Insurance on commercial goods in international transit
Insurance on international railway rolling stock
"Long-term" insurance, including life insurance and permanent health insurance, but excluding medical insurance
The Channel Tunnel
Insurers and providers will collect and pay the insurance premiums from the policies that they issue and will include details of these payments in their financial statements.