Overview

• Insurance Premium Tax receipts from motor policies rose 8.6% last year to £692 million, driven by higher premiums and claims payouts.
• The standard 12% rate on car insurance has remained unchanged since 2017, up from 2.5% when IPT was introduced in 1994.
• Association of British Insurers figures show average annual motor cover jumped 15% to £622 in 2024 as total claims payouts climbed 17%.
• The AA and ABI are pressing HM Treasury to freeze or cut the levy, including a proposal for 50% relief on premiums for newly qualified drivers.
• A cross-government taskforce led by the Treasury and Department for Transport will publish recommendations this autumn, with insurers warning that rising costs risk driving more motorists uninsured and into fines and licence points.