Mel Stride’s claim about £900 ‘tax cut’ for workers doesn’t account for threshold freezes

On BBC Breakfast [1:38:45] and the Today programme [2:13:16] this morning, Secretary of State for Work and Pensions Mel Stride repeated a claim that the government having reduced National Insurance contributions by one third “is worth a tax cut of £900 to an average earner”. 

As we have explained before, the £900 figure refers to savings from reductions to employee National Insurance contributions (NICs). In January the main rate for NICs was reduced from 12% to 10%, and in April it was lowered from 10% to 8%. 

It’s right that an employee on the average full-time salary (£35,400) will pay about £900 less in NICs due to the combined four percentage point reduction than they would have were the main rate to have stayed at 12%.

However, the £900 figure only relates to the specific impact of the reduction in NICs and Mr Stride’s claim would benefit from additional context. Other changes, such as ongoing freezes to the thresholds at which people begin paying NICs and income tax, mean the overall savings this year for someone on the average salary are substantially smaller.

Once the impact of all tax changes since 2021 are factored in, the Institute for Fiscal Studies says the average worker stands to save £340 in 2024/25, while those earning less than £26,000 a year will actually be worse off. 

The IFS adds: “By 2027–28, after another three years of real-terms cuts to tax thresholds, the net effect of income tax and NICs changes since 2021 for the average full-time earner will be a tax cut of £140 per year.”