Price comparison site moneysupermarket.com believes the government’s decision to increase insurance premium tax (IPT) as part of the new budget will have an extremely detrimental impact on UK drivers.

Steve Sweeney, head of car insurance at moneysupermarket.com, said: “VAT [value added tax] and CGT [capital gains tax] might be the ‘watch words’ today for most Brits, but Osborne’s emergency budget has dealt a stealth blow to all motorists and homeowners. By increasing IPT by 20% from January 4, 2011, (from 5% to 6%) the government has delivered a most unwelcome hike for cash-strapped Brits.

“This measure could see more uninsured drivers on the road. Our research has already found a fifth of motorists (20%) admit breaking the law by driving uninsured, and while motorists are already suffering from premiums rising way beyond the rate of inflation, this tax rise will be very painful especially for those paying high premiums.”

The worse affected will be those who are already in the highest car insurance price brackets, for example young male drivers. According to moneysupermarket.com’s research, a young male driver without a no-claims bonus could see his premium increase by more than £133 per year, while a 40-year-old male with a five-year no claims bonus is likely to pay just £21 more.