The AA have demanded up to a 50 percent reduction in car tax fees with certain drivers who are “disproportionately” affected to save more.
The motoring experts have called for an urgent cut to Insurance Premium Tax (IPT) which is applied on top of car insurance policies.
Campaigners called for the changes in the latest AA ‘Motoring Manifesto’, suggesting two tiers of fees depending on motorists’ situation.
They feel a 25 percent reduction in IPT rates for experienced divers would be fair meaning everyone would benefit from a small reduction.
But, they feel newly qualified drivers should be issued larger discounts with young motorists already “priced out” of running a vehicle.
Instead, the breakdown group wants to see IPT rates slashed up to 50 percent for anyone who has only recently passed their test.
The AA report explained: “IPT is a 12 percent surcharge on most car, home, and breakdown cover.
“There is no case for increasing IPT when premiums are high, so we argue for a general 25 percent reduction in IPT and a 50 percent reduction in IPT for newly qualified drivers as they are disproportionately hit by high premiums and therefore pay higher amounts of IPT. Many young drivers are already priced out of the market.”
IPT rates have dramatically increased since its introduction 30 years ago with fees doubling over the last decade. IPT fees stood at just 2.5 percent back in 1994 before jumping to six percent in 2015.
Fees then rose to 9.5 percent in November 2015 before rising to 10 percent in October 2016 and 12 percent in June 2017.
According to Compare the Market, IPT is paid by everyone with a car insurance policy except for disabled drivers who lease a car through the Motability scheme.
Paul Daly, spokesperson for car insurance firm InsureDaily, has also recently called for an urgent reduction in IPT rates.
He has previously suggested that a surge in car insurance prices across the UK has led to a 10 percent rise in IPT revenues for the Government
He stressed cutting IPT fees would help consumers save on the cost of motoring with many families struggling.
He explained: “Whilst we appreciate it might be hard for the government to directly influence the price through insurance providers, one step it could take is to cut the Insurance Premium Tax (IPT) rate down from 12 percent.
“As the Government’s purse from IPT earnings is a percentage of the Insurance Premium amount, the Government is currently benefiting by earning more based on the higher premiums coming through.
“With a reduced IPT rate, the Government could still pull in the same amount of revenue as last year and save the consumer the difference.”
