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Government urged to exempt ‘black box’ cover from car tax

Paloma Kubiak
Written By:
Paloma Kubiak

The government should tweak the tax system to reward those who drive safely, a group is urging.

Removing Insurance Premium Tax (IPT) on ‘black box’ (telematics) motor insurance policies could save the average driver £180 a year. However, for younger drivers who already face the highest insurance premiums, this could save them around £470 a year.

With the average young driver premium standing at £1,141, a tax exemption on black box devices could mean savings of 40% on the cost of cover.

A poll of 2,000 people by Vodafone revealed widespread support for the idea, with 63% saying they’re open to using the technology in their cars to reward them for safe driving.

Black box technology includes a smartphone-sized box which is installed inside a car and works like a sat-nav or GPS but monitors how a motorist drives. An estimated one million policies are in place.

It records and assesses speed, acceleration, braking, the time of day the car’s being driven and how it’s manoeuvred around corners. The data is then shared with a driver’s insurance company which can alter the premium price day-by-day.

Only 17% of those polled said they would never consider installing the technology in their vehicle.

Insurance Premium Tax is a revenue maker for the Exchequer

Insurance Premium Tax (IPT) levied on the majority of policies has doubled in the last few years, currently standing at 12%.

Estimates suggest it brings in revenue of £1bn from domestic vehicles. But according to the Social Market Foundation, rises in IPT have outstripped those for tobacco duty, with the tax now generating more for the Exchequer than beer, cider, wine and spirit duties.

But research from the British Insurance Brokers’ Association (BIBA), suggests that an IPT exemption for telematics-based products would cost the Treasury £100m in year one, rising to £160m over five years.

Anne Sheehan, enterprise director at Vodafone, said: “Black box technology can make the roads safer and provide cheaper premiums, especially for younger drivers. Our research shows that there is widespread support – among every age group – for the idea of telematics technology in cars, especially if people can benefit financially.

“Removing Insurance Premium Tax on telematics-based motor policies will, put simply, encourage safer driving while saving money for hard-pressed motorists.”