IPT, or Insurance Premium Tax, is a UK tax charged on most general insurance premiums, including motor, home and pet cover. It is collected by the insurer and passed to HMRC, so the quoted price already includes it.
In one line: IPT is a government tax added to most general insurance premiums and collected by the insurer.
How IPT works
Insurance Premium Tax applies to general insurance such as car, home, pet and breakdown cover. It is charged at a standard rate of 12% (HMRC, 2026-27), with a higher rate of 20% for certain travel and warranty products.
On a home insurance premium of 250 GBP before tax, standard-rate IPT of 12% adds 30 GBP, so the customer pays 280 GBP in total. The tax is shown within the headline price rather than billed separately.
Life insurance and some long-term policies are exempt from IPT, which is why those products are not affected.
IPT vs VAT
VAT does not apply to insurance because insurance is exempt, so IPT exists as a separate tax on premiums instead. The two are charged at different rates and on different things.
IPT is built into the premium the customer sees, so there is no separate line to reclaim, unlike VAT on many business purchases.
Primary source: HMRC: Insurance Premium Tax