Some motorists are “disproportionately paying more tax” than other road users which is generating a “windfall” for the Government, according to experts.
IAM RoadSmart Director of Policy and Standards Nicholas Lyes warned that Insurance Premium Tax (IPT) rates needed to be addressed.
The experts stressed that young drivers between 18 and 25 were most affected with calls for immediate action to be taken.
IPT is an extra 12 percent charge on car insurance premiums paid by every road user in the UK.
However, young drivers are charged a higher IPT rate as their monthly or annual premiums are a lot higher than more experienced drivers.
Recent car insurance price rises have only added to the issue with motorists paying even more IPT than before.
Nicholas explained: “While the insurance sector believes we may now be over the worst of price increases, falling premiums will feel like a lifetime away for newly qualified drivers.
“Perversely, young drivers are also disproportionately paying more tax when insuring their vehicle because insurance premium tax is levied at a standard 12 percent rate on already costlier premiums, meaning something of a windfall for the Treasury.”
Experts at IAMRoadSmart have outlined a series of proposals to tackle the issue which includes axing the charge altogether.
According to the safety group, The Treasury should consider halving IPT rates from 12 percent to six percent for those aged under 25.
Meanwhile, policyholders under the age of 25 who complete an “approved driving or riding course” should then be eligible for a zero percent IPT charge.
IAMRoadSmart claims this move will encourage the take-up of a skills-based assessment.
Nicholas added: “This is why we are launching a three-point action plan for the Government to give young motorists some respite.
“Moreover, it’s time the Government, the road safety sector and the insurance industry got around the table to thrash out some longer-term solutions which should include a form of graduated driver licensing.
“Making sure we upskill young drivers of today will ensure we have better drivers for tomorrow.”
