The average worker isn’t getting a £450 a year tax cut overall

In advance of this week’s Budget, we’ve seen a claim that could confuse people coming up again. A post on X (formerly Twitter) from the account of the Conservative party says that the recent cut in the rate of National Insurance is “saving the average worker £450 per year”.

We have looked at this claim before and found that it’s missing important context. 

Although it is true that the NI reduction will mean someone on £35,000 a year, roughly the average full-time wage, will pay £450 less in National Insurance than if the rate had remained the same, this figure doesn’t account for other changes in their taxes. 

According to the Institute for Fiscal Studies (IFS), when viewed alongside ongoing freezes to the threshold at which people begin paying National Insurance contributions and income tax, the savings for someone on the average salary are substantially smaller, at around £130.

The IFS says there has been a “record-breaking increase” in tax revenues this Parliament, and that in the medium term the cuts in National Insurance offset “only about a quarter of the increase in the tax on labour income [wages]” from consecutive freezes of tax thresholds since March 2021.

If, as currently planned, the thresholds remain frozen until 2027/28, the IFS estimates the average worker will be paying around £440 a year more in direct tax at that point, compared with 2021.