The government today confirmed it will increase the small claims limit to £5,000 – but only for 'RTA-related personal injury' claims.

Announcing the Prisons and Courts Bill, the Ministry of Justice said it will impose a new threshold of £2,000 for all other personal injury claims.

The figure is a retreat from the original proposal to increase the limit across the board, but the reform is still likely to be unwelcome with claimant lawyers who face being effectively removed from low-value whiplash claims altogether.

The MoJ will push through with plans for fixed tariffs to cap whiplash compensation payments.

There will also be a ban on any offers to settle whiplash claims without providing medical evidence.

The government expects the reforms to be implemented in full on 1 October 2018.

The ban and compensation tariffs will both require primary legislation and will form part of the Prisons and Courts Bill.

The change in the small claims limit needs just secondary legislation and could in theory be introduced as soon as October, but the Ministry of Justice has confirmed it will only bring in the revised limit when the bill has become legislation and all the plans can be implemented together.

The MoJ today said it expects car insurance premiums to be cut by around £40 a year as a result of the reforms.

Lord chancellor Liz Truss has previously stated the government’s aim to target those who have ‘exploited a rampant compensation culture and seen whiplash claims as an easy payday’.

Justice minister Sir Oliver Heald today said: 'We are determined to get a grip on the widespread compensation culture that unfairly impacts millions of motorists through higher premiums.

'So we are cracking down on minor, exaggerated and fraudulent whiplash claims. And we expect insurers to fulfil their promise and put the money saved back in the pockets of the country's drivers.'

The tariff figures were revealed in the government's consultation response published later this morning. The amounts cover both whiplash claims and 'minor' psychological claims – for example travel anxiety or shock.

Damages are limited to £225 for injures lasting up to three months, £450 for injuries lasting up to six months, and £765 wheree the injury lasts up to nine months.

Compensation is £1,190 for injuries lasting up to a year, £1,820 for injuries lasting up to 15 months, £2,660 where the injury lasts up to 18 months and £3,725 where the injury lasts up to two years.

The bill, due to be published today, will provide the judiciary with the facility to both decrease the amount awarded under the tariff in cases where there may be contributory negligence or to increase the award (with increases capped at no more than 20%) in exceptional circumstances.