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What the Summer Budget means for young drivers

In amongst all that budget commentary we've had streaming down our Twitter feeds for the last few days, there was some bad news about road and car insurance tax.

How the new budget affects your car insurance

Generally, insurance premiums are subject to a 6% tax called Insurance Premium Tax (IPT). Well, they are for now. When the tax change comes in, that'll hike up to 9.5%. That is a massive increase - over 50% - and young drivers will be the worst hit as they have the most expensive premiums. On the average premium for a 17-year-old driver, it adds another £65 to their insurance costs. ^AB13287F42D9B35EFCE82D9E71D905C6CB6BE38A61AD1D6E90^pimgpsh_fullsize_distr / Towers Watson, Q1 2015

Where's our IPT exemption?

One of the reasons we wrote our Young Driver Report last year was to task the government with giving young drivers an IPT exemption for the first few years they're on the road - the period when their insurance is most expensive - if they opt for telematics insurance. As we've shown that drivers in our community have a 40% lower risk of crashing than their peers, we see this as another way to incentivise safe driving on top of the discounts available. Oh - and our underwriter partners, Ageas, calculated that it would also save our (clearly cash-strapped) economy £500 million through the prevention of 28,749 crashes annually by the exemption's 7th year. What we have in the new budget is the very opposite - not only are young drivers often judged by the behaviour of the few (something we fight against with the driving data we collect, so we can treat every driver as an individual), they're going to be paying more pounds in tax because they have to pay more pounds for their insurance in the first place. It's very disappointing news and makes telematics an even more important option when young drivers are trying to get behind the wheel affordably. Drive well, people - your 21% discount is about to become even more precious.

How the new budget affects your vehicle tax

Currently, cars with low emissions are often vehicle tax-free. We wrote a piece not so long ago about our favourite cars in insurance group 1, most of which have no vehicle tax on them for at least the first year. But that's all about to change. Soon, the only cars qualifying for zero-rate vehicle tax will be those with zero emissions. That's right - ZERO. That rules out every vehicle outside of electric cars. Good move for the environment, but still a bitter pill to swallow for people who choose low emissions cars for the tax break.
By enforcing a blanket 3.5% increase in IPT, the latest budget disproportionately penalises young drivers, who already pay the highest prices for premiums. ingenie calculates an average increase of up to £65 per policy for under 25s - one of the groups least able to afford it. For some time, ingenie - along with our underwriters Ageas - has been calling on the government to waive IPT altogether for young drivers who choose telematics insurance. Young drivers with telematics policies are 40% less likely to have an accident and should therefore be incentivised to use the systems. There has never been a better time to introduce this change than now, to help offset the possibly unseen consequence of this IPT rise for young people.

Chris McKee ingenie CEO

Read more about IPT in our Young Driver Report.

Honor Clement-Hayes

By Honor Clement-Hayes

Honor joined ingenie in 2014 and is in charge of words on the Young Driver's Guide and blog. Her first car is a Peugeot 206 cabriolet, which is a very sensible choice for the British climate. Follow her on .