Car tax fury: Motoring experts slam Chancellor for not axing IPT rates in budget

Car tax specialists have previously urged the government to reduce rates which heavily affects young motorists. IPT rates are calculated as a percentage of your overall car insurance policy meaning the charges often affect less experienced drivers.


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However, motoring groups have pushed for IPT rates to be lowered or even completely scrapped for those with telematics insurance policies.

Telematics insurance provider, Insurethebox have said they were disappointed in not seeing IPT rates reduced which would have made a real difference to road safety.

The group are joined by experts from across the motoring industry after widespread campaigning for the charges to be scrapped

However, Rishi Sunak did not decide to change the level of IPT in yesterday’s budget with rates remaining at 12 percent.

Compare the Market has put the average cost of IPT charges for a young driver at £134 compared to just £77 for the road users.

The massive price difference reveals charges are distributed disproportionately across different age groups.

Warren Hetz, spokesperson for Aloi Nissay Dowa UK, a parent company of insurethe box said: “The data acquired through telematics insurance not only protects lives, but helps reduce the pressure on emergency services and saves the Government money every year.

“It’s disappointing, therefore, that this wasn’t recognised in yesterday’s Budget. It is crucial that we motivate young and inexperienced drivers to choose telematics-based insurance for those safety advantages.

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“They will not, however, be persuaded to do so en masse unless they can see a clear financial benefit.”

The AA and the RAC have previously advocated for IPT rates to be scrapped for those with telematics black boxes installed in their cars.

Speaking after the news, AA President Edmund King revealed the rates would be a stealth tax on motoring but was pleased rates were not increased further.

Mr King said: “The Chancellor has made the right decision in freezing Insurance Premium Tax at 12 percent.


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“Keeping car insurance affordable plays an important role in road safety, and any hike on IPT would have been a stealth tax on legal motoring.”

IPT rates have soared over recent with charges increased from six to 12 percent between 2015 and 2017.

Motoring insiders have previously branded the charges as a “regressive tax” aimed at hitting those who can least afford it.

In their 2020 Road Safety Manifesto, the British Insurance Brokers Association (BIBA) described the fee as “clearly unsustainable”.

BIBA has called upon the government to increase on-street safety with greater incentives for those with telemetry installed in their cars.

The Association of British Insurers has previously encouraged the government to continue to freeze IPT charges.

Mark Shepherd, ABI’s Assistant Director and Head of Insurance Policy said: “This tax penalises drivers for simply complying with the law and having motor insurance, hitting hardest those facing higher premiums, such as younger drivers.”

Compare the Market have also actively campaigned for the removal of the charges saying the reality wax a tax on young people.

Experts at MoneySuperMarket have previously warned an increase in IPT rates may have caused insurance firms to increase charges.

A spokesperson said an increase would have seen renewal charges rise from April. 

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