Home Science Car tax changes possible as motoring groups push Chancellor for cuts to "stealth" charge

Car tax changes possible as motoring groups push Chancellor for cuts to “stealth” charge

Car tax rules mean motorists are forced to pay strict Insurance tax rates on top of their policies which hit vulnerable motorists the hardest. Insurance companies are now piling the pressure on Chancellor Sajid Javid to reduce tax rates in his March budget to help make car insurance prices more affordable for cash-strapped motorists.

IPT rates currently stand at 12 percent in a figure double the overall costs seen just five years ago.

Speaking to Express.co.uk, David Stevens, CEO of car insurance group Admiral said: “We sincerely hope the Government has no plans to raise [IPT] further in the upcoming Budget.

“For years we’ve argued that it’s a uniquely regressive tax, hitting those motorists hardest who can least afford it.

“Young drivers, who are a higher risk and so typically pay more for their insurance, are particularly affected.

READ MORE: Car tax changes could see a rise in company cars 

Insurance PremiumTax has doubled over the last five years (Image: Getty)

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“How can it be fair that an 18-year-old student has to pay four or five times as much tax on top of her insurance premium than her 48-year-old father?”

According to Compare the Market, IPT works in a similar way to VAT rates and adds extra percentage onto your overall car insurance price.

According to the car experts, a motorist with an average premium of £500 will actually pay £560 once the added 12 percent is included.

However, a higher tax rate can apply to some car insurance policies which are taken out directly with dealerships.

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The standard 12 percent rate is enough to see wild price rises for many young motorists who are already forced to pay expensive charges for basic cover.

Recovery group the AA has claimed new drives under black box telematics systems should not be liable to pay the extra IPT charges.

They say the number of car insurance claims made by those with telematics technology is up to one-third less than those without.

AA’s director of insurance Janet Connor said a cut to IPR rates would discourage uninsured driving and improve road safety.

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She added: “Telematics policies track driver behaviour and premiums reflect the driving standard of individuals.”

The Association of British Insurers (ABI) has heavily campaigned against IPT rates which the group claims is the mother of all stealth taxes.

Analysis from the group shows IPT rates adds an extra £50 to the average price of yearly car insurance costs.

However, the group claims the government benefited from an extra £6.3billion across the 2018/19 financial year from IPT taxes.

The added charge was said to bring in more money than taxes imposed on beer, wine and gambling.

Mark Shepherd, ABI’s Assistant Director and Head of General Insurance Policy said: “Motor insurance may remain very competitive, but motorists still face being on the receiving end of the mounting cost pressures that insurers are facing.

“One obvious and much-needed way to help motorists is for the Government to reduce the IPT burden in its March Budget.

“This tax penalises drivers for simply complying with the law and having motor insurance, hitting hardest those facing higher premiums, such as younger drivers.”

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Speaking to Express.co.uk, Admiral’s David Stevens said; “We agree with the ABI and encourage the Chancellor to not only freeze the IPT rate, but to go further and cut it.

“Better still, why not consider a much fairer system; a flat-rate tax, so all motorists pay the same amount regardless of the annual premium?”

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