Drivers warned of further car insurance price hikes as Hunt avoids scrapping premium 'stealth tax'

Drivers warned of further car insurance price hikes as Hunt avoids scrapping premium 'stealth tax'

WATCH: Drivers warned of expensive car insurance prices

Hemma Visavadia

By Hemma Visavadia

Published: 06/03/2024

- 14:31

Insurance Premium Tax adds around £67 to the average car insurance policy

The Chancellor of Exchequer has decided to not cut the insurance premium tax in this years Budget announcement despite pleas from insurers to do so.

Insurance premium tax is a levy added to motor and other types of coverage which insurers pass down to motorists and is usually included in the cost of motor policies.

The tax is applied in two types: a standard rate of 12 per cent for motor insurance and a higher rate of 20 per cent for travel coverage, as well as some motor vehicle policies.

The current IPT rate adds £67 to the average motor premium, with these costs adding up for drivers who are already paying extremely high rates of insurance.

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cars on motorway and screenshot of Jeremy Hunt

Car insurance in the final months of 2023 was £157 higher compared to the same time in 2022


The Association of British Insurers had been calling on the Government to cut the “hidden” tax in the lead-up to the Budget.

In response to the Budget, Jack Cousens, a spokesperson at the AA said he was disappointed that the Chancellor did not review IPT.

He commented: "This levy on responsible motoring, has added such a financial burden on car ownership, especially younger drivers, that it’s estimated that a million people drive without insurance.

"It’s not only illegal but it adds unnecessary costs and worry to every law-abiding driver."

The Association calculated that the average price paid for motor insurance in the final months of 2023 was £157 higher compared with the same time a year earlier.

Between October 1 and December 31 last year, motorists paid an average of £627 for car insurance, a huge jump from £470 during the same period a year prior.

Commenting on the Budget, RAC head of policy Simon Williams explained that a cut to IPT would have helped keep spiralling motor insurance premiums in check.

Instead, he warned, even the most careful and cautious of drivers will have to go on battling with rising premiums.

Williams argued that it can’t be right that those who have the least financial means to pay for car insurance end up, in many cases, contributing the most to the Government in the form of IPT.

He said: "Those hardest hit face two options – give up driving altogether or run the gauntlet and break the law by driving uninsured, neither of which are desirable outcomes.

"IPT more than doubled over a two-year period in the last decade, which is why we believe it’s the stealth tax of our time. For that reason, it’s high time it was looked at again.”

Speaking before the Budget, Mervyn Skeet, director of general insurance policy at the ABI, said: “It is high time we unmask this tax which penalises people and businesses for being responsible.


Learner driver

The average car insurance quote for younger drivers is over £2,000


“This tax hits the poorest hardest because they typically spend more on insurance, such as home and motor cover, as a proportion of their income.

“There has never been a better time for the government to show its support to the millions of homeowners and businesses who do the right thing by buying insurance. We should cut IPT now.”

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