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Insurance Premium Tax
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A tax on general insurance premiums, charged instead of VAT, which insurance is exempt from. Anyone buying car, home, pet or travel insurance. It is included in the premium you are quoted, and most people have never heard of it. It raised £9.0bn in 2025–26, which is 1.0% of everything HMRC collects and 0.29% of the economy. That is up £154m (1.7%) on the year before.
Figures for the 2025–26 financial year. Source: HM Revenue and Customs.
Key figures
- 12%Standard rate 2.5% when introduced in 1994
Sources: HM Revenue and Customs, HM Treasury.
What is the short version?
- How big: £9.0bn in 2025–26, 1.0% of everything HMRC collects; after inflation, 98% more than in 2015–16.
- Latest change, 2015: A period of rapid rises begins: 6% to 9.5%, then 10%, then 12% within three years.
- Where it goes: Nowhere in particular, like almost every tax: it is not earmarked.
- The argument: Without it, a large part of consumer spending would be untaxed; against that, it taxes prudence: people are penalised for insuring against risk.
How much does it raise?
It raised more than the year before, but the other taxes grew faster, so its share of the total fell. It raised more than the year before, but the economy grew faster, so its share of GDP fell.
How does it work?
Insurance is exempt from VAT, so Insurance Premium Tax was created to tax it anyway. The standard rate applies to most general insurance: motor, home, pet.
A higher rate applies to travel insurance and to insurance sold alongside certain vehicles and appliances, originally to stop retailers dodging VAT by bundling cover with the product.
Life insurance, permanent health insurance and reinsurance are exempt.
It is not shown separately on most quotes, which is why it is close to invisible despite raising billions.
| Rate | Charged | On |
|---|---|---|
StandardDetails for Standard | 12% | most general insurance: car, home, pet, business |
| ||
HigherDetails for Higher | 20% | travel insurance, and insurance sold with certain vehicles and appliances |
| ||
Rates: GOV.UK, Insurance Premium Tax rates. Checked by hand 22 September 2026.
How has it changed?
Each change in the standard rate since it was introduced. It has nearly quintupled; most of the rise came in three steps between 2015 and 2017.
The numbers behind this chart
| From | Rate |
|---|---|
| 1994 | 2.5% |
| 1997 | 4% |
| 1999 | 5% |
| 2011 | 6% |
| 2015 | 9.5% |
| 2016 | 10% |
| 2017 | 12% |
How it got here, and why each change was made:
- 1994Introduced at 2.5% as a way of taxing a large exempt sector.
- 1997A higher rate is added for travel and bundled insurance, to close a deliberate avoidance route.
- 2015A period of rapid rises begins: 6% to 9.5%, then 10%, then 12% within three years.
Where does the money go?
Nowhere in particular. Insurance Premium Tax is not earmarked. It goes into the Consolidated Fund and is spent on whatever the government of the day decides.
Because it is not earmarked, the only honest way to show what it pays for is by proportion. If insurance premium tax receipts of £9.0bn were spent in the same proportions as all public spending in 2025-26, they would break down like this. It is an illustration of scale, not a statement about where those particular pounds went.
See for every £100 of tax for the full picture.
Does it change what people do?
Insurers say higher rates increase the number of uninsured drivers, since motor insurance is compulsory but unaffordable cover is not. The evidence linking IPT rises specifically to uninsured driving is suggestive rather than conclusive, because premiums move for many reasons at once.
When a tax rise stops raising money looks at the cases where the effect has been large enough to move the revenue.
What are the arguments?
Both columns are set out as their strongest case, not as a preferred answer and a strawman. See how this site handles contested questions.
Common questions
- Is there tax on insurance?
- A tax on general insurance premiums, charged instead of VAT, which insurance is exempt from. Anyone buying car, home, pet or travel insurance. It is included in the premium you are quoted, and most people have never heard of it.
- £9.0bn in 2025–26, which is 1.0% of everything HMRC collects.
- Nowhere in particular. Insurance Premium Tax is not earmarked. It goes into the Consolidated Fund and is spent on whatever the government of the day decides.
Use this data
The figures belong to the bodies that published them and are used under their terms, listed in Sources for this page; most are Crown copyright under the Open Government Licence. Only our own words, analysis, charts and derived calculations are ours, published under CC BY 4.0: reuse them, including commercially, if you credit Tekstak Ltd and link back to this page.
Download
- Insurance Premium Tax receipts by financial year (CSV) JSON HM Revenue and Customs: Open Government Licence v3.0
- Total HMRC receipts by financial year (CSV) JSON HM Revenue and Customs: Open Government Licence v3.0
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Sources for this page
| Source | Publisher | Figures as of | Updated | Licence |
|---|---|---|---|---|
| HMRC tax receipts and National Insurance contributions for the UK | HM Revenue and Customs | the 2025–26 financial year | annual | Open Government Licence v3.0 |
| GDP deflators at market prices, and money GDP | HM Treasury | the 2025–26 financial year | annual | Open Government Licence v3.0 |
Each source's figures are used under the licence shown. Our own words, analysis, charts and derived calculations are ours, under CC BY 4.0.