Insurance Premium Tax (IPT) Explained

28/11/2022

Person holding £10 notes in a brown wallet

Last Updated: 01 Oct 2025
Read time: 3 minutes

Written by: Deirbhile Coyle
Insurance Writer

Written in line with our Editorial Guidelines

What is insurance premium tax

Insurance Premium Tax or IPT is a tax on insurers for general insurance premiums such as car insurance, home insurance and travel insurance. There are two IPT rates and some exceptions; read on to find out what these are and how they affect you.

How much are Insurance Premium Tax rates?

*Insurance Premium Tax is unfortunately unavoidable and will have an impact on your premiums, there are two rates of IPT.

The current rate which is 12%
A higher rate of 20% ‐ for travel insurance, mechanical/electrical appliances insurance and some vehicle insurance

Tax Rate	% Total	Insurance Included
Current standard rate	12%	Most insurance policies
Higher tax rate	20%	Travel insurance Electrical appliances cover Mechanical appliances cover Some vehicle insurance

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Who pays Insurance Premium Tax?

IPT is a mandatory tax that customers pay along with their insurance policy. The IPT is unavoidable, and it is a requirement to be insured when driving on UK roads. It might be tempting to try and avoid paying for insurance. However, the risks outweigh the costs, as if you are caught, you will be fined and given penalty points on your license.

How does IPT tax affect the price of your car insurance?

Regardless of your policy and provider, the 12% or 20% IPT will be worked into your premiums, so if you pay £380 in premiums per year, then that is the amount you’ll pay, inclusive of IPT. For those on higher premiums, such as young drivers, this percentage will be a particular sting.

What insurance is exempt from IPT?

There are some notable **exceptions to what types of insurance can be charged IPT. We’ve listed the following for your reference.

Most long-term insurance is exempt
Insurance for some commercial ships and aircraft
Insurance for international goods in transit
Premiums for items insured outside the UK. Although these will likely face a similar local tax by other nations
Reinsurance

Only insurers and those who charge the insured need to register to directly pay IPT to the UK government. For you, the IPT cost will be worked into your premiums.

Can you claim back the insurance premium tax?

Unfortunately, IPT is not like VAT; it’s not possible to claim this back. The only case where you may be able to claim it back is if it’s been paid in error; otherwise, it is non-refundable.

Related Insurance Products

Given that IPT is unavoidable and will increase the cost of your premiums, it is very important that you compare multiple quotes before committing to a policy to make sure you are getting the best deal. At Quotezone, helping people find better deals is important to us.

References:

*https://www.gov.uk/guidance/insurance-premium-tax

**https://www.gov.uk/government/publications/notice-ipt-1-insurance-premium-tax/notice-ipt1-insurance-premium-tax

This article is intended as generic information only and is not intended to apply to anybody’s specific circumstances, demands or needs. The views expressed are not intended to provide any financial service or to give any recommendation or advice. Products and services are only mentioned for illustrative rather than promotional purposes.