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Insurance premium tax increase will hit younger drivers, says RAC

The RAC has warned that next week’s increase in Insurance Premium Tax (IPT) from 6% to 9.5% will hit young motorists hardest, significantly raising the bar for anyone starting driving for the first time.

The RAC estimates that the increase is due to cost motorists an extra £386 million a year, taking their insurance tax contribution to over £1 billion for the first time.

The IPT tax hike, announced in the Chancellor’s Summer Budget in July 2015, will add £12.80 to an average annual car insurance premium of £367.

Young drivers aged 25 and under pay an average of £810 a year for their insurance with 18 to 20-year-olds paying £972 a year.

The insurance premium tax (IPT) rise would take their next renewals to £838 and £1,006 – increases of £28 and £34 respectively.

Mark Godfrey, RAC Insurance director, said: “Insurance is – rightly – mandatory for anyone getting behind the wheel.

“The 3.5% hike in IPT is another stealth tax like fuel duty that has unreasonably added to the already considerable contribution made to the Treasury by motorists. With insurance premiums currently going up faster than they have in the last five years, it’s sadly going to be a double whammy of bad news for the motorist.

“Young drivers tell us the cost of insurance is the biggest barrier to them owning and running a car after passing their test. Sixty-two per cent of young drivers surveyed by the RAC felt this was the case as opposed to 22% who felt it was buying a car and 12% who cited day-to-day running costs.”



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