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Ask the insurance expert

Home insurance tax confusion?

Wednesday, 02 Jan 2008 17:42
A reader from Wokingham is uncertain what insurance premium tax is payable on.

Paul White, a consultant at Belgravia Insurance Consultants, part of our team of Independent Financial Advisers (IFAs) from unbiased.co.uk, offers a helping hand.

Colin from Wokingham asks:

Is insurance premium tax (IPT) only on the premium or on the premium, plus admin fee, plus legal insurance?

Thank you.

Paul from Belgravia Insurance Consultants replies:

On your Certificate of Insurance, you should see the net insurance premium stated, to which a separate amount of five per cent (the lower rate of IPT) has been added. So far so good.

Where your confusion arises is that, as the tax is only five per cent and legal expenses are quite cheap anyway, you are usually given a flat figure of £15, which includes the IPT.

It is also common for brokers to charge an admin fee of a further £15, which does not incur any tax, as it is not an insurance premium.

If you have a personal finance question for our team of Independent Financial Advisers (IFAs) from unbiased.co.uk, go to the myfinances.co.uk Ask the Expert section.



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