UK drivers are facing a significant increase in car insurance premiums, with research from the AA showing a nearly 9% rise in insurance premium tax (IPT) over the past year.
This surge in IPT has sparked concerns that many drivers, especially young and low-income individuals, may be priced out of essential motor policies.
The AA is urging the Treasury to reduce the IPT rate on motor insurance by 25%, with a 50% reduction for newly qualified drivers. The current standard rate of IPT has remained at 12% since 2017, a sharp increase from the 2.5% rate introduced in 1994.
As premiums have risen, standard-rate IPT receipts reached £692 million last year, an 8.6% increase from the previous year, partly driven by rising car and property insurance costs.
Edmund King, president of the AA, emphasized that the tax on motor insurance is essentially a tax on responsible ownership, highlighting the financial strain it puts on individuals who are already struggling to afford necessary coverage. King warned that the high cost of premiums could lead to more people being tempted to drive without insurance, further increasing the risks for everyone on the road.
Related topics:
- New U.S. Auto Tariffs May Push Car Insurance Prices Up 7%, But Effects Take Time
- Auto Insurance Shopping Surges 18% in Q2 2025 as Consumers Seek Savings
- Auto Insurance Deficit Grows, Industry Eyes Premium Increases Amid Rising Losses
