Mark's motor insurance policy indicates a premium of £100 and an additional charge for Insurance Premium Tax (IPT). What is the amount of IPT charged?

Mark's motor insurance policy indicates a premium of £100 and an additional charge for Insurance Premium Tax (IPT). What is the amount of IPT charged?

• A. £5
• B. £12
• C. £15
• D. £25

Answer: (B)

In the UK, Insurance Premium Tax (IPT) is typically charged at a rate of 12% for standard insurance policies, including motor insurance. To calculate the IPT on Mark's premium of £100, one simply takes 12% of the premium amount. Calculating this gives: IPT = 12% of £100 = 0.12 * £100 = £12. Therefore, the amount of IPT charged on Mark's motor insurance policy is indeed £12, making this the correct answer. Understanding how IPT is calculated and the applicable rates helps in assessing one’s potential costs when acquiring insurance, which is crucial for budgeting appropriately.

In the UK, Insurance Premium Tax (IPT) is typically charged at a rate of 12% for standard insurance policies, including motor insurance. To calculate the IPT on Mark's premium of £100, one simply takes 12% of the premium amount.

Calculating this gives:

IPT = 12% of £100 = 0.12 * £100 = £12.

Therefore, the amount of IPT charged on Mark's motor insurance policy is indeed £12, making this the correct answer. Understanding how IPT is calculated and the applicable rates helps in assessing one’s potential costs when acquiring insurance, which is crucial for budgeting appropriately.