Increases to premium tax are set to present even larger bills to UK motorists.

The new coalition government’s announcement of increases for premium taxes means that consumers who purchase motor, travel, home and private medical insurance will all be hit with higher prices.

As it currently stands, a five per cent levy is applied to all households that buy general insurance, which comprises part of the overall insurance premium tax (IPT). However, as of January 4 next year, this figure will increase to six per cent. As an example, a male teacher who drives a Ford Focus and is working in Manchester will find his annual insurance premium increase from £423.39 by 21.13 to £444.52 according to estimates from moenysupermarket.com.

Younger drivers will face even stiffer rate rises. An 18-year-old male who is studying in Middlesex will likely see his annual premium rise by around £133.18 per year, growing from £2,668.81 to an estimated £2,801.99.

The rising cost of insurance will see more and more people decide to do without cover according to insurance experts, with taxes on protection forecasted to be increasingly done away with as consumers continue to feel the lingering effects of the economic downturn. In the past 12 months, UK consumers have already shown a trend away from purchasing insurance cover due to the recession, with analysts concerned that increases to premiums will only compound the trend.

There is also a worry across the insurance industry that higher premiums will create a greater class of uninsured motorists who prefer to take their chances rather than pay out for protection.