On 22 July 2010 the Chancellor of the Exchequer, George Osborne, presented his emergency Budget. The Budget set out measures to close the UK deficit by 2015-16, several of which will impact directly on the insurance industry.

Insurance Premium Tax (IPT)

The standard rate of IPT will increase to 6% from 5%, taking effect from 4 January 2011. The higher rate of IPT will increase to 20% from 17.5% from that date.

These increases to IPT were described in the Budget as being in line with the announced increase in the rate of VAT, to 20% from 17.5% from January 2011.

Corporation Tax

Companies will benefit from a reduction to the main rate of corporation tax, to 24% from 28%, over the course of four financial years from 1 April 2011, when the first 1% reduction will take effect. The small companies’ rate (now known as the small profits rate) of corporation tax will be reduced to 20% from 21%, with effect from 1 April 2011.

Capital Gains Tax

From 23 June 2010, entrepreneurs and individual investors will be affected by an increase in capital gains tax, to 28% from 18% for higher rate tax payers. However, they will benefit from an increase to the lifetime limit for entrepreneurs’ relief, to £5 million from £2 million, which will take effect from 23 June 2010. Gains subject to entrepreneurs’ relief will continue to be taxed at 10%.

Further information about the Budget 2010 is available at the HM Treasury website here.