Insurance Premium Tax (IPT) Calculator UK 2026
Calculate Insurance Premium Tax (IPT) on UK insurance policies. Standard rate 12%, higher rate 20% for certain insurance types. Instant IPT calculation.
Frequently Asked Questions
What is Insurance Premium Tax in the UK?
IPT is a UK government tax on general insurance premiums. The standard rate is 12%, applied to most insurance including home, car, and pet insurance. A higher rate of 20% applies to some travel insurance and mechanical or electrical appliance insurance.
Is life insurance subject to IPT?
No. Life insurance, permanent health insurance, commercial ships and aircraft insurance, and export insurance are exempt from IPT.
How do I work out IPT on a gross premium?
To extract IPT from a gross premium at 12%: divide by 1.12 to get the net premium, then subtract. For 20%: divide by 1.20. For example, £560 gross at 12% = £500 net + £60 IPT.
Can businesses reclaim IPT?
No. Unlike VAT, IPT is a cost to the insured and cannot be reclaimed as input tax. It is a true cost that must be absorbed by the policyholder.
Has IPT changed recently?
The standard rate was raised from 6% to 9.5% in 2015, then to 10% in 2016, and to 12% in 2017 where it has remained. The higher rate of 20% has been in place since 1997.
Understanding Insurance Premium Tax (IPT)
Insurance Premium Tax is a UK government levy charged on most general insurance premiums. It was introduced in 1994 at a rate of 2.5% and has been increased several times since. The standard rate currently stands at 12%, which took effect on 1 June 2017 and remains unchanged for the 2025/26 tax year. A higher rate of 20% applies to certain categories of insurance, including travel insurance sold with related goods or services, mechanical and electrical appliance insurance, and some motor vehicle insurance arranged through car dealers.
IPT is collected by the insurer and paid to HMRC, but the cost is passed on to the policyholder as part of the gross premium. Unlike VAT, IPT cannot be reclaimed by businesses as input tax, which makes it a genuine additional cost for both individuals and companies purchasing insurance. This is an important distinction for business owners who may assume insurance tax works like VAT.
Several types of insurance are exempt from IPT entirely. These include life insurance, permanent health insurance, long-term care insurance, insurance for commercial ships and aircraft, reinsurance, and insurance related to exports. Private medical insurance is subject to the standard 12% rate, not the higher rate, which is a common misconception.
How to Use This Calculator
Enter the net premium amount (the cost before IPT is added) in the first field. Select the appropriate IPT rate: 12% for most standard insurance policies such as home, car, pet, and private medical insurance, or 20% for higher-rate categories like travel insurance bundled with a holiday or mechanical breakdown cover sold with appliances. Click "Calculate IPT" to see the tax amount and your total gross premium.
If you already know the gross premium (the amount you actually pay) and want to find out how much IPT is included, you can reverse the calculation. For 12% IPT, divide the gross premium by 1.12 to get the net amount, then subtract the net from the gross. For 20% IPT, divide by 1.20 instead. This is useful when comparing insurance quotes or when preparing business accounts where you need to separate the insurance cost from the tax element.
IPT Rate History and 2025/26 Rates
The standard IPT rate has risen significantly since its introduction: 2.5% (1994), 4% (1997), 5% (1999), 6% (2011), 9.5% (November 2015), 10% (October 2016), and 12% (June 2017). The higher rate of 20% was introduced in 1997 and has remained unchanged. There is ongoing speculation about further increases, particularly as the government seeks to raise revenue. For the 2025/26 tax year, both rates remain at 12% and 20% respectively, with no changes announced in the Autumn Budget 2024.