Budget 2016: RAC comments on Insurance Premium Tax increase

RAC Insurance director Mark Godfrey said: “The Treasury is already set to raise £386m from car insurance policies as a result of increasing IPT by 3.5% to 9.5% from 1st November last year. Regardless of whether motorists should be contributing another £52m from their car insurance policies to pay for flood defences, it is unclear whether money generated from IPT will continue to be ring-fenced in this way further into the future.

“The Chancellor clearly sees IPT as a soft target, presumably as a result of getting away with raising it last summer with very little complaint from consumers or the insurance industry.

“What makes this latest IPT rise a particularly bitter pill for the insurance industry to swallow, alongside the implementation costs, is the fact that we are yet to see any of the insurance premium reductions mooted in the Chancellor’s Autumn Statement from new initiatives aimed at cutting compensation claims for soft tissue injuries in the small claims courts. In fact the cost of insurance is rising, in part due to his previous IPT rise.”

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The RAC Media Centre provides journalists and news outlets with the latest motoring-related news, comment, data and research.

The RAC is an iconic UK brand, and provides complete peace of mind to more than 14.5 million UK private and business drivers - whatever their motoring needs. As well as its premium nationwide breakdown assistance service – with an expert branded patrol workforce attending more than two million breakdowns every year – and European breakdown assistance products, it offers a wide range of market-leading products across insurance, legal services, vehicle inspections and service, maintenance and repair. Included in this is the first-of-its-kind nationwide Mobile Mechanics service which brings the garage to homes and workplaces. 

At the forefront of new solutions for business fleets and consumers, the RAC’s breakdown service is electric-ready with mobile EV charging technology and be called on using myRAC – its all-in-one route planner, fuel finder and breakdown reporting app

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