Andy Burnham has been urged to cut the 12% Insurance Premium Tax (IPT) that every driver in the UK is currently paying on car insurance policies. Tom Jervis, consumer writer at Auto Express, has called on the new Prime Minister to reduce the fee, which is applied by the UK government to most insurance policies, including car insurance agreements.
Most motoring policies are charged 12% IPT, meaning £53.57 in tax is paid on a £500 annual insurance plan. Car insurance premiums have dipped since their peak in 2023, but the high cost remains a barrier to entry for many on lower incomes.
Call for action on insurance costs
Speaking exclusively to Express.co.uk, Tom said: “We would like to see a limit on finance APRs and potentially even a reduction on Insurance Premium Tax for motor insurance. We would also like to see insurers and regulators forced to think more boldly about how they can make insurance affordable for people who rely on their cars.”
IPT was introduced in 1994 as a way to generate tax from the insurance industry, with fees initially set at just 2.5%. However, the costs have increased over the years, with IPT charges rising to 6% in 2015, 9.5% in November 2015, 10% in October 2016 before hitting 12% in June 2017.
Motoring groups push for change
Tom is not alone in calling for immediate action to slice IPT fees on car insurance policies, with motoring groups repeatedly pushing for changes. Last year, the Association of British Insurers described IPT as an “unfair levy on a responsible purchase”. Meanwhile, the AA suggested that heavy car insurance bills threatened to price some individuals off the roads completely or could tempt some road users to travel without valid cover in place.
The motoring group has previously called on officials to cut IPT fees by 25% for all drivers, with an increased 50% discount for younger road users. AA President Edmund King previously said: “Insurance premium tax on motor insurance is a tax on responsible ownership – protecting yourself and third parties from the financial damage of incidents and injuries.”
