Driving is an expensive business - and motorists are about to be hit in the pocket again.

On Thursday June 1, the government’s tax on insurance premiums rises from 10% to 12%.

This will add an average of £16 to drivers’ annual car insurance costs, according to Amanda Stretton, motoring editor at Confused.com.

The increase will hike the average car insurance premium up from £781 to £797, based on Confused.com’s price index.

It’s the latest unwelcome news for drivers, who have been feeling the effects of a steadily climbing rate of Insurance Premium Tax (IPT) for some time.

To put the IPT rate rise into context, the average car insurance premium was £629 in October 2015, when IPT was just 6%.

“It’s easy to see why drivers are so upset about yet another IPT rate rise since it has doubled in 18 months,” Ms Stretton said.

That’s not all - car insurance premiums will continue to shoot up thanks to changes in the personal injury discount rate which came into force in March.

This is the rate by which compensation for future losses - received by victims of car crashes and others - is reduced to account for the interest it will earn.

The government has responded to low interest rates by lowering the discount rate from 2.5% to 0.75%, meaning insurers can expect to pay out a lot more money to claimants.

Drivers will have to bear the brunt of this significant change through their premiums.

Ms Stretton forecasted that, as a result, average car insurance premiums are on course to hit £1,000 by the end of 2018.

“Thankfully, insurers are now required to show drivers the price of their premium from the previous year at the point of renewal,” she said.

“This will serve as a reminder that loyalty doesn’t always pay.

“Motorists looking to avoid car insurance price hikes should take note of their renewal price and check to see whether they can get a cheaper premium elsewhere.”

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