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What is IPT or Insurance Premium Tax?

All insurance quotes and premiums you get in the UK are subject to a tax called Insurance Premium Tax. Like other taxes such as VAT, there are different rates of IPT, depending on where you get your insurance from. We will explain IPT, how it is charged as well as showing you how you can pay a lower rate if you buy gap insurance independently from a specialist like GapInsurance123.


IPT, the tax on insurance


What is Insurance Premium Tax?

Well it is a form of tax that must be added to any insurance premium you are given in the UK today. It is collected, along with your premium, and paid directly from the insurer to the Treasury.

Many insurance backed products are subject to IPT, from Gap Insurance to motor insurance, service plans to warranties. If the product you buy is not insurance backed, then the price of it would be subject to VAT instead.

IPT must be added to your quote, and with all vehicle quotations from ourselves the premium you see has the correct rate of IPT included in the price. So if we quote you £150 then that is the price you pay, as IPT is already included in our quotes from GapInsurance123.

The rate at which IPT is calculated is based on a percentage of the premium price. Currently, this rate is 6% from a specialist like ourselves, but here is a very important point:

The rate at which IPT is different if the company quoting you is involved in the sale or provision of the vehicle to you. 

For example, if the motor dealer who sells you the vehicle also provides you for with Gap Insurance, then the rate of IPT must be charged at the same rate as VAT, currently 20%.

If you buy gap insurance from an independent broker such as GapInsurance123 it is only 6%.

So you can immediately make a 14% saving before we even begin on any other savings we can offer you.

You motor dealer may not tell you of this, and indeed we believe that many motor dealers do not even realise that there is a legal requirement for the difference, but the 14% saving is one major factor why motor dealer products can seem quite expensive.


GapInsurance123 and IPT savings



The tax saving by using an independent broker is just the beginning of the savings you can make.

A motor dealer is restricted to selling Gap Insurance to their own customers, and so may only present a few hundred policies to the insurer each year. An independent broker such as GapInsurance123 will produce that many sales in a matter of days, and so the negotiating power we have with the suppliers of Gap Insurance provide us with massive discounts.

These cost savings can be passed on to our customers, meaning you can find savings of 80% or more on comparable products between the dealer and a broker.

So its not just all about Insurance Premium Tax, but you can see you can save on IPT by buying away from the motor dealer.

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