Money raised from Insurance Premium Tax last year totalled £692million.
Drivers face being slapped with an “unfair levy” – as they demand the Labour Party government makes tax changes so they can be spared a £300 fine and licence points.
Money raised from Insurance Premium Tax last year totalled £692million. Data shows motorists and road users paid a total of almost nine per cent more in tax on their car insurance policies in 2024.
The standard rate of Insurance Premium Tax (IPT) has remained at 12 per cent since 2017, but was only 2.5 per cent when it was first introduced in 1994.
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Data from the AA found that the total amount of IPT from car insurance has totalled almost £700million, an increase of 8.6 per cent compared to the previous year.
HMRC suggested that the increase was down to “rising car and property insurance premiums”. Edmund King, President of the AA, said IPT was a “tax on responsible ownership”, noting that it was forcing drivers to protect themselves and others from the financial damage of an accident.
He added: “Surges in the cost of insurance over recent years have ratcheted up the pain for those most prone to paying high premiums.
“Many of those are people least able to afford it, such as young and newly qualified drivers with higher risk, as well as low-income policyholders.
“That not only threatens to price them out of cover but tempts more to drive without insurance,” he told the PA news agency.
The ABI has also called on the Government to freeze the rate of IPT “until fiscal and financial conditions allow for the standard rate to be cut”.
A spokesperson added: “While we appreciate fiscal headroom is limited given pressures on public spending, we continue to believe that insurance premium tax is an unfair levy on a responsible purchase.”
A Treasury spokesperson said: “The overall cost of insurance is determined only in part by Insurance Premium Tax, which contributes over £8billion a year towards vital public services.
“Our cross-Government taskforce on motor insurance will deliver on our commitment to support drivers by finding ways to tackle the high cost of motor insurance.”
